Econ 2
B.
The largest source of revenue for the federal government is ___________. A. excise taxes. B. individual income taxes. C. corporate income taxes. D. the sales tax.
B.
The last firm to enter earns ___________. A.average economic profits. B.zero economic profits. C.positive economic profits. D.the greatest economic profits.
horizontal
The longdashrun supply curve in a perfectly competitive market is
B.
The longdashrun supply curve in a perfectly competitive market states that _____. A.both the longdashrun quantity and the equilibrium price decrease B.the longdashrun quantity can vary while the equilibrium price returns to the price at the minimum of the average total cost C.the longdashrun quantity remains the same while the equilibrium price varies D.both the longdashrun quantity and the equilibrium price increase
production
The process of transforming inputs into output.
specialization
The result of workers developing a certain skill set in order to increase total productivity.
A.
The value of marginal product of capital (VMPK) is the ____________. A. contribution that each additional unit of physical capital adds to a firm's revenues, all else equal. B. total revenue a firm earns from employing all units of physical capital. C. contribution that each additional unit of physical capital adds to a firm's output, all else equal. D. cost that a firm incurs when adding more physical capital.
A.
To construct the supply curve in a market with many firms with different cost structures, the ___________. A.individual supply curves for each firm are added together. B.minimums of the firms' long-run average total cost curves are linked together. C.minimums of the firms' marginal cost curves are linked together. D.individual average variable cost curves are added together.
A.
Under which of the following examples is it likely that the accounting profit is positive and the economic profit is negative? A.If you open an amusement park in the middle of New York City. B.Opening a bank branch near a university campus. C.Using a store in the mall to sell clothes instead of shoes. D.Such a scenario, where accounting cost is positive and economic profit is negative, is not possible
B.
Unless shutdown or exit is optimal, every firm expands production until ___________. A.marginal cost is minimized. B.marginal revenue, marginal cost, and price are all equal (MR = MC = P). C.marginal revenue is equal to the minimum of short-run average total cost. D.marginal product is maximized.
A.
VMPK equals _________. A. MPK times P. Your answer is correct.B. (MPK times P)/Output per day. C. Output per day times P. D. K times P.
D.
A government would want to be on this curve where ___________. A. inequality does not exist. B. the trade-off between reducing social inequality and reducing social efficiency is greatest. C. inefficiencies do not exist. D. there is no correct answer to this question, as the answer depends on a government's value judgments.
A.
A production possibilities curve (PPC) ___________. A. shows the relationship between the maximum production of one good for a given level of production of another good. B. determines the levels of imports and exports within a country. C. shows the trade-off between price and quantity of produced goods or services. D. shows the combinations of inputs that can create a specific level of output.
B.
All firms in a perfectly competitive market are said to be __________. A.price leaders. B.price takers. C.price neutral. D.profitable in the long run.
C.
All of the following statements are true of a labor supply curve except: A. It is upsloping due to the substitution effect. B. Higher wages increase the opportunity cost of leisure. C. It is downsloping due to the income effect. D. The market supply of labor curve is plotted to the right of the individual supply curves
C.
An individual or a firm can internalize an externality by ___________. A. disputing that an externality exists. B. ignoring the externality. C. paying the cost of the externality. D. doubling the size of the externality.
C.
Are all efficient outcomes also equitable? Explain. A. Yes, if an outcome is efficient, then by definition, it maximizes social surplus and consequently must be equitable. B. No, the only efficient outcome that is equitable is the one that results in an equal distribution of goods across society. C. There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative economics, where subjective value judgments are made. D. No, only those efficient outcomes that produce a rich-to-poor income ratio less than 5.0 are equitable.
A.
Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case? A.Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price. B.Terry uses soy milk for producing his chocolates, while Donna uses almond milk for producing hers. C.Jessica, a chocolate seller, sometimes sets her price lower or higher than the price at which other sellers sell their chocolates. D.Pam wants to produce chocolates but she is unable to as Roy controls all the cocoa farms in the region.
B.
Consumer sovereignty suggests that ____________. A. consumers should be more open to government nudges. B. government should not interfere with consumer choices. C. consumers make better choices than government. D. government should always interfere with consumer choices.
A.
Direct regulation is ____________. A. direct actions by the government to control the amount of an activity. B. the government determining the incidence of a tax. C. consumer sovereignty in a competitive market. D. using the tax system to influence behavior.
A.
In a competitive market equilibrium, the allocation of the social surplus is such that ____________. A.no individual can be made better off without making someone else worse off. B.all participants are equally satisfied with the outcome. C.equity among the participants is attained. D.no individual can be made better off or worse off.
B.
Does price gouging have the same effect as setting prices above equilibrium level? A. No, price gouging harms buyers, while prices set above equilibrium damages sellers. B. No, price gouging is actually an equilibrium outcome, while the setting of prices above equilibrium is not. C. Yes, both result in unjustifiably high prices given underlying supply and demand conditions. D. Yes, both produce an excess of quantity supplied over quantity demanded.
B.
Externalities are called market failures because they ___________. A. cause markets to overproduce when there is inflation. B. cause markets to produce suboptimal social outcomes. C. raise prices in an unfair manner for the poor. D. raise prices for everyone.
E.
Firms estimate the demand for labor by ____________. A. computing the marginal product of labor and multiplying it by the price of the product being produced. B. determining the value of marginal product of labor (VMPL). C. examining the additional output produced when additional workers are employed. D. all of the above. E. A and B only.
E.
Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to ____________. A. generate black markets. B. implement taxation. C. increase bureaucracy. D. decrease debt. E. reduce poverty.
A.
How does the labor-leisure trade-off determine the supply of labor? A. An increase in the wage rate is an increase in the opportunity cost of leisure, and can therefore be expected to reduce the amount of leisure one wishes to consume. Choosing less leisure is equivalent to supplying more labor, thus yielding a positive relationship between the wage rate and the amount of labor supplied. Your answer is correct.B. When an individual chooses an amount of leisure to consume, he is simultaneously choosing a quantity of labor to supply. Since leisure is a normal good, an increase in the wage induces more consumption of leisure and therefore a smaller quantity of labor supplied. C. Individuals typically trade off working versus leisure in an unplanned, unsystematic way. As a result, the supply of labor exhibits a bit of randomness, showing that higher wages sometimes increase the quantity of labor time supplied and sometimes decrease the quantity of labor time supplied. D. The supply of labor is no different than the supply of any other good or service in that it is primarily affected by production costs. In the case of labor, the dominant production cost is the cost incurred to acquire employable skills. The supply of labor is upward-sloping because higher wages are required to cover the expense of gaining more skills
C.
How would the introduction of legal or technical barriers to entry affect the long-run equilibrium in a perfectly competitive market? A.It would create downward pressure on prices, causing firms to exit the market. B.It would make all firms in the market less competitive, since any artificial barrier hurts the market overall. C.It would reduce any downward pressure on prices from entry and allow economic profits in the long run. D.There would be no effect on the market, since there are no barriers to entry in perfectly competitive markets
D.
How would you depict the trade-off between equity and efficiency on a graph? A. Equity on one axis and inefficiency loss on the other with a U-shaped function. B. Equality on one axis and deadweight loss on the other with a negatively-sloped function. C. Poverty on one axis and efficiency on the other with a negatively-sloped function. D. Inequality on one axis and social surplus on the other with a positively-sloped function.
A.
If demand shifts to the left (decreases), the last firm that entered ____________. A.earns negative economic profits and so exits the market. B.earns positive economic profits, leading to new firms entering the market. C.is indifferent between producing or exiting the market and so the outcome is indeterminate. D.earns negative economic profits and thus undertakes cost-cutting measures to return to profitability.
C.
If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ____________. A. firms currently making calzones will switch to making pizza. B. firms will increase their productivity to lower their marginal costs. C. firms currently making pizza will switch to making calzones. D. firms will continue making their current product since demand curves will adjust to equilibrate prices in both markets
B.
If you produce at a point on your PPC, then you are producing at a point that is ____________. A. unattainable. B. attainable and efficient. C. attainable but inefficient. D. attainable if resource prices fall.
cannot, identical goods, losing all its customers
In a perfectly competitive market, a seller choose to raise the price of its good since all sellers in the market produce identical goods , so raising the price would result in
D.
In assessing the performance of a perfectly competitive market, we can say that ____________. A.any departure from the equilibrium necessarily reduces social surplus. B.price efficiently allocates goods and services to buyers and sellers. C.no individual can be made better off without making someone else worse off. D.all of the above.
law of diminishing returns
Increases in inputs eventually lead to less additional output.
D.
Is it possible for accounting profit to be positive and economic profit to be negative? A.No, economic profit and accounting profit will always end up being the same. B.Yes, this could occur if implicit costs were modest and explicit costs were high. C.No, economic profit must always be larger than accounting profit. D.Yes, this could occur if explicit costs were modest and implicit costs were high
B.
Is the entire burden of the tax always borne by those on whom it is imposed? A. Not necessarily, since the burden of the tax falls on producers. B. Not necessarily, since the burden of the tax depends on price elasticity. C. Yes, since taxes are paid by producers. D. No, the burden of the tax is always passed along to others.
C.
John will continue to consume leisure up to the point at which _______ A. the wage rate is equal to the total cost. B. the marginal benefit of leisure is equal to the total cost. C. the marginal benefit of leisure is equal to the marginal cost. D. the wage rate is equal to the marginal cost.
physical capital
Machines and equipment that can be used for production.
D.
National security concerns might cause a nation to: A. specialize in the production of one good. B. increase imports of oil. C. become reliant on its trading partners. D. maintain a variety of agricultural industries.
B.
The goal of a business in a perfectly competitive market is to maximize: A.units sold. B.profits. C.margins. D.revenues
D.
Paternalism is the view that ___________. A. consumer choices represent people's preferences, and the government should not interfere with these choices. B. government intervention is always necessary to prevent people from making mistakes or bad choices. C. people are entitled to make bad decisions because government will "nudge" them to make good decisions. D. people do not always know what is best for them, and government should encourage them to make the right choices
long run
Period of time when all of a firm's inputs can be varied.
short run
Period of time when at least one of a firm's inputs is fixed.
non rival, rival
Public goods are goods, while common pool resource goods are goods.
B.
Suppose one firm accounts for 55 percent of the global market share for a product, while 147 other firms account for the remaining 45 percent of the market. With such a large number of buyers and sellers, is this market likely to be competitive? A.Yes, a competitive market is characterized by having many firms, regardless of size. B.No, even though there are many firms in the market, there is one firm large enough to influence the market price. C.Yes, markets are only competitive if there is at least one firm large enough to act as a price setter for all other firms. D.No, even with such a large number of buyers and sellers, there must be barriers to entry for this market to stay competitive.
B.
Tax incidence refers to ____________. A. how much revenue a tax generates. B. who bears the burden of a tax. C. the average tax rate. D. the extent to which a tax is progressive.
A.
Terms of trade are determined ____________. A. on the basis of opportunity costs. B. by sellers. C. on the basis of absolute advantage. D. by buyers.
marginal product
The change in total production associated with using one more unit of input.
A.
The equilibrium price is the ___________. A.long-run average total cost of the last entrant into the market. B.minimum of the average variable cost of the smallest firm in the market. C.average marginal cost of the firms. D.long-run average total cost of the first entrant into the market.
C.
What is the difference between accounting profit and economic profit? A.Economic profit only subtracts implicit costs from total revenue, while accounting profit only subtracts explicit costs. B.Accounting profit subtracts both explicit and implicit costs from total revenue, while economic profit only subtracts explicit costs. C.Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs. D.Accounting profit only subtracts implicit costs from total revenue, while economic profit only subtracts explicit costs.
A.
What is the intent of a Pigouvian tax? A. To induce producers of a negative externality to reduce production to the socially optimal level. B. To eliminate the force of the invisible hand in market transactions. C. To mandate by government fiat the reduction of production to the socially optimal level. D. To encourage producers of a negative externality to increase production to the socially optimal level.
C.
When determining which firms enter the market first, we look at ____________. A.fixed costs. B.average variable cost. C.average total cost. D.marginal cost.
D.
Which of the following describes the long-run competitive market if demand were to increase? A.Market price decreases, economic profits decrease, short-run market supply decreases, long-run supply settles at minimum AVC B.Market price increases, economic profits increase, short-run market supply decreases, long-run supply settles at minimum AVC C.Market price decreases, economic profits decrease, short-run market supply increases, long-run supply settles at minimum ATC D.Market price increases, economic profits increase, short-run market supply increases, long-run supply settles at minimum ATC
B.
Which of the following is a cost associated with government intervention in an economic system? A. Unemployment. B. Corruption. C. Externalities. D. Inequality.
D.
Which of the following is not a source of a country's comparative advantage? A. Relative abundance of labor and capital. B. Natural resources. C. Technology. D. Terms of trade.
A.
Which of the following is not an example of when the free market fails to generate maximum social surplus? A. Private goods. B. Externalities. C. Common pool resources. D. Public goods.
B.
Which of the following is not an externality? A. Rochelle has asthma caused by the pollution of a local factory near her home. B. Jordan has lung cancer from smoking cigarettes. C. Alisha did not sleep well because her neighbor was playing loud music. D. Jose, who is allergic to pollen, is sick from the flowers that grow in his neighbor's garden.
A.
Which of the following is the largest source of revenue for state governments? A. Miscellaneous taxes and fees, such as tolls on roads and public transportation tickets. B. Property tax. C. Individual (federal) income tax. D. Sales tax.
C.
Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its profit? A.Produce up to the point where price equals average total cost. B.Produce until marginal cost is furthest below average total cost. C.Produce until marginal revenue equals marginal cost. D.All of the above.
C.
he Coase Theorem states that ____________. A. public and private partnerships will result in an efficient allocation of resources. B. government and private partnerships will result in an efficient allocation of resources. C. private bargaining will result in an efficient allocation of resources. D. public bargaining will result in an efficient allocation of resources.
E.
he price at which a seller is indifferent between making a sale and not doing so is known as his ____________. A.willingness-to-sell value. B.breakeven point. C.reservation price. D.all of the above. E.A and C only.
