ECON 4 Final Review
Farmers can generally sell as large a quantity of their crop as they wish, as long as they are willing to accept the prevailing market price. True/False
True
In a perfectly competitive scenario, a firm's marginal revenue is equal to price, so the profit-maximizing quantity is where P = MC. True/False
True
In the long run, all factors of production are variable. True/False
True
Issuing fishing and hunting licenses are options for dealing with tragedy of the commons. True/False
True
Overharvesting common resources such as seaweed and wildflowers is referred to as "tragedy of the commons." True/False
True
The profit-maximizing choice for a monopolist is to produce at a quantity where MR = MC. True/False
True
The types of monopoly are based on the barriers of entry they exploit. True/False
True
Utilities such as water, natural gas, telecommunications and electricity are typically monopolies. True/False
True
Protectionist policies make imported goods more __________ for consumers. affordable expensive
expensive
The effect of a market exchange on a third party outside the exchange is called a(n): outlyer. externality. collateral impact.
externality
Imposing trade barriers will cause the average level of wages in an economy to: fall. rise. insufficient information to determine.
fall.
Taking social costs into account will shift the demand curve. True/False
false
Under monopsony, employers hire _____ workers and pay a _____ wage than employers in a perfectly competitive market. fewer; lower more; higher fewer; higher more; lower
fewer; lower
Which of the following are ways a business can differentiate its products or services (choose all that apply): packaging distribution quality consumer perception
packaging distribution quality consumer perception
Union member earn roughly ______ than nonunion workers. 2% more the same as 20% more
20% more
_______ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. Collusion A monopoly An oligopoly A cartel
An oligopoly
Which of the following represent barriers to entry? Control of a resource. Legal restrictions on competition. Economies of scale. Industry competition. National security. Technological superiority.
Control of a resource. Legal restrictions on competition. Economies of scale. Technological superiority.
A firm pursuing a predatory pricing strategy will generally maintain the discounted pricing after competition is eliminated. True/False
False
A limitation of the perfectly competitive market structure is that potential new entrants generally face barriers to market entry. True/False
False
A natural monopoly is one that is based on control of a natural resource. True/False
False
A patent gives an inventor the exclusive right to make, use or sell the invention for his or her lifetime. True/False
False
American agricultural subsidies have no effect on farmers in other countries. True/False
False
As is true in a monopoly market structure, barriers to entry shield monopolistically competitive firms from new entrants. True/False
False
Barriers to entry restrict a monopolist's ability to earn significant economic profits. True/False
False
Both the gender and race earnings gaps have been essentially closed. True/False
False
For a monopolist, the profit-maximizing level of output is the same as the revenue-maximizing level of output. True/False
False
For firms in a perfectly competitive market, both marginal revenue and marginal cost are constant across changes in quantity. True/False
False
Free trade has no income redistribution effects. True/False
False
History teaches us that market forces can eliminate discrimination. True/False
False
In the short run, the perfectly competitive firm will react to losses by reducing fixed costs. True/False
False
Monopolists are productively efficient. True/False
False
Pollution is not considered an externality. True/False
False
Predatory pricing is a legal way of deterring potential competitors. True/False
False
Prisoner's Dilemma reasoning supports development and maintenance of public goods. True/False
False
Protectionist policies allow a country to maximize the benefits of comparative advantage. True/False
False
The U.S. economy is considered to be an example of a perfectly competitive market structure. True/False
False
The cost of protectionist policies is paid by producers. True/False
False
The first rule of labor markets is some employees are worth more than others. True/False
False
Two of the characteristics of a perfectly competitive market structure are many firms that are producing highly differentiated products. True/False
False
Union membership in the United States is higher than in most of the developed nations. True/False
False
Externalities can be positive or negative. True/False
True
When a firm operating in a perfectly competitive market is experiencing losses, it should continue operations if: P < AVC P = AVC P > AVC
P > AVC
A city park is an example of a public good. True/False
True
A firm's profit-maximizing choice of output will occur where MR = MC. True/False
True
A monopolist faces no significant competition. True/False
True
A monopsony faces the market supply curve for labor. True/False
True
A policy requiring that imports meet specific safety standards is a non-tariff barrier to trade. True/False
True
Collusion is a violation of antitrust law. True/False
True
When there is market power on both the supply and demand sides of the labor market, the market is: in equilibrium. a bilateral monopoly. a monopsony.
a bilateral monopoly.
Monopolists ____ allocatively efficient. are are not
are not
In a perfectly competitive labor market, firms can hire all the labor they want at: a price above the market wage. at the market wage. below the market wage.
at the market wage
If the price that a firm charges is lower than its ________ of production, the firm will suffer losses. average cost marginal cost fixed cost variable cost
average cost
If, in a perfectly competitive market, P = (a firm's) ATC, then the firm: earns an economic profit. breaks even. is operating at a loss.
breaks even
A _____ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price. prisoner's dilemma cartel game theory duopoly
cartel
When firms act together (without a formal agreement) to reduce output and maintain high prices, it is called: a cartel. collusion.
collusion.
Free trade generally increases (select all that apply): consumer surplus. producer surplus. social surplus.
consumer surplus. social surplus.
Protectionism is associated with a(n) __________ in economic efficiency. decrease increase no impact
decrease
Each additional unit sold by a monopolist will _____ the overall market price, and as more units are sold, this _____ applies to more and more units. increase; higher decrease; lower
decrease; lower
The marginal product of labor _____ as the employer hires additional workers. increase/decreases
decreases
For a perfectly competitive firm, the marginal revenue curve is identical to the firm's: demand curve. supply curve. net revenue.
demand curve
In the market for golf balls, manufacturers offer an array of products that are: distinctly different in a particular way. virtually identical from a competitive standpoint. not competitive goods.
distinctly different in a particular way
The demand curving facing a monopolistic competitor is: flat. the market demand curve. upward-sloping. downward-sloping
downward-sloping
A marginal cost curve tends to be ____ at low levels of output and ____ at higher levels of output. downward-sloping; upward-sloping upward-sloping; downward-sloping
downward-sloping; upward-sloping
The demand curve facing a monopolistically competitive firm is more ______ than that facing a monopolist. elastic inelastic
elastic
Adding pollution control measures into the the cost of production will result in a (check all that apply): higher price lower price greater quantity of production increase in demand. decrease in quantity of production. reduction in pollution.
higher price decrease in quantity of production. reduction in pollution
Protectionism for infant industries __________ domestic users of the product. imposes costs on results in lower prices for
imposes costs on
If a firm in a perfectly competitive market is producing at a quantity where MR > MC, than it can increase profit by: reducing output. increasing output.
increasing output
If the CEO of major corporation is playing prisoner's dilemma then, from his or her perspective, the gains to be had from cooperation are: smaller than the rewards from pursuing self-interest. larger than the rewards from pursuing self-interest.
larger than the rewards from pursuing self-interest.
Relative to a firm in a perfectly competitive industry, a monopolist produces: less, at a higher average cost and price. more, at a higher average cost and price. less, at a lower average cost and higher price.
less, at a higher average cost and price.
Employment will be _____ in an imperfectly competitive industry than it is in a perfectly competitive industry. higher/lower
lower
Market-oriented environmental tools achieve any desired reduction in pollution at a _______ cost to society than command-and-control legislation. higher lower
lower
In the framework of monopolistic competition, the objective of advertising is to: make a firm's perceived demand curve more elastic. make a firm's perceived demand curve more inelastic. increase demand for the firm's product or service.
make a firm's perceived demand curve more inelastic. increase demand for the firm's product or service.
Utilities such as water, natural gas, telecommunications and electricity are typically monopolies. Maker/Taker
maker
In an imperfectly competitive market, the value of a worker's marginal product is equal to: product price. marginal revenue product. insufficient information to determine.
marginal revenue product.
A monopolist faces _______ demand curve. horizontal market upward-sloping vertical
market
In a perfectly competitive scenario, _____ determine(s) the market price. a dominant producer market supply and demand individual producers
market supply and demand
Pollutions charges are an example of: command-and-control environmental regulation. market-oriented environmental tools.
market-oriented environmental tools.
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to: match price increases, but not price cuts. position themselves at opposite ends of the competition spectrum. match price cuts, but not price increases.
match price cuts, but not price increases.
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call: a cartel. collusion. monopolistic competition. perfect competition.
monopolistic competition.
A labor union operates like a _______ in a labor market. regulator monopsony monopoly
monopoly
A sole employer in a small town would be a: monopoly. monopsony.
monopsony
Saving a job through protectionism typically costs __________ the actual worker's salary. approximately the same as much more than much less than
much more than
When the quantity demanded is less than the minimum quantity it takes to be at the bottom of the long-run average cost curve, the situation calls for: government subsidy. legal monopoly. market exit. natural monopoly.
natural monopoly.
When a perfectly competitive market is in long-run equilibrium: firms have an incentive to enter the market. firms have an incentive to leave the market. no firm has an incentive to enter or leave the market.
no firm has an incentive to enter or leave the market
Command-and-control environmental regulation offers __________ to improve the quality of the environment beyond the standards set by law. an incentive no incentive
no incentive
A free rider problem can arise when a good or service is: excludable. nonexcludable.
nonexcludable
The U.S. soft drink industry is a classic example of a(n) ________ market structure. perfect competition monopolistic competition monopolistic oligopolist
oligopolist
When exit occurs in a monopolistically competitive industry the perceived demand and marginal revenue curves will shift to the right. perceived demand and marginal revenue curves will shift to the left. perceived demand curve will shift to the left. marginal revenue curve will shift to the left.
perceived demand and marginal revenue curves will shift to the right
In market structure terms, monopoly is the opposite of: monopolistic competition. oligopoly. perfect competition.
perfect competition
If a firm operating in a perfectly competitive market can sell a virtually unlimited quantity at the prevailing market price, the firm faces a(n) _____ demand curve. elastic unitary elastic perfectly elastic
perfectly elastic
In places where there are many low-skilled immigrants, the effects of immigration on taxes are generally _____ at the federal level and _____ at the state and local levels. positive; positive negative; negative positive; negative negative; positive
positive; negative
Perfectly competitive firms are said to be: price makers price takers
price takers
A pharmaceutical firm that has been awarded patent protection for a drug has created a monopoly for that product by: __________. regulating demand for the product. restricting entry into the market. restricting competitive advertising. restricting product development.
restricting entry into the market
In a perfectly competitive market, the demand for labor is: the marginal price of labor the marginal product of labor the marginal product of labor x P marginal revenue
the marginal product of labor x P
In a monopolistically competitive market, positive economic profits attract competition, which: shifts an existing firm's demand curve and margin revenue curve to the left. which shifts an existing firm's demand curve and marginal revenue curve to the right. has no affect on the original firm's demand curve.
shifts an existing firm's demand curve and margin revenue curve to the left.
Protectionism: creates new jobs. causes a net loss in jobs. shifts jobs, with no new jobs created.
shifts jobs, with no new jobs created.
For a perfectly competitive firm, the marginal cost curve is identical to the firm's: demand curve. supply curve. average total cost curve. average variable cost curve.
supply curve
A(n) __________ is a tax that governments impose on imported goods and services. import quota non-tariff barrier tariff
tariff
The demand for labor is considered a "derived" demand; that is, it is dependent on: the hiring firm's demand for labor. the demand for the hiring firm's products. the price of the hiring firm's products.
the demand for the hiring firm's products.
Firms operating in a perfectly competitive industry are said to have only one major choice to make: what price to charge. what quantity to produce.
what quantity to produce
