ECON EC Sample Final
An airline ticket from Seattle to Miami costs $760. A bus ticket costs $360. Traveling by plane will take 6 hours, compared with 26 hours by bus. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be a. $18 per hour. b. $20 per hour. c. $38 per hour. d. $44 per hour.
b. $20 per hour.
Winston is a ghostbuster and also an excellent typist. He can type 150 words per minute, but has all of the ghostbusting work he can handle at $90 per hour. Janine is a secretary who would like some typing work but can only type 50 words per minute. According to the law of comparative advantage, Winston should hire Janine to do his typing if and only if her wage rate is less than a. $10 per hour. b. $30 per hour. c. $45 per hour. d. $90 per hour.
b. $30 per hour.
Jeff buys a new shirt for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase a. $50. b. $65. c. $35. d. $15.
b. $65.
A regressive tax is defined as a tax for which the a. average tax rate rises as income increases. b. average tax rate falls as income increases. c. average tax rate remains constant at all levels of income. d. dollar tax liability of those with higher income is less than the dollar tax liability of those with lower income.
b. average tax rate falls as income increases.
Mr. Peters can drive or fly from Riverside, California to Las Vegas, Nevada, for a one-day business trip. If he drives, he will be able to work three hours once he arrives in Las Vegas, whereas traveling by plane will enable him to work eight hours. His expected income from each hour of work in Las Vegas is $30. If Mr. Peters is a rational decision maker, he will fly if and only if the price differential (air cost minus driving cost) is less than a. $30. b. $90. c. $150. d. $240.
c. $150.
Marisole recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Marisole income elasticity for steak dinners is a. 2, making her demand for steak elastic b. 2, making steak a luxury for her c. 0.5, making steak a necessity for her d. 0.5, making her demand for steak inelastic
c. 0.5, making steak a necessity for her
If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be a. $6,000. b. $8,000. c. $40. d. $60.
a. $6,000.
If a firm is making zero economic profit, it a. will not survive in the long run. b. is doing as well as typical firms in other markets. c. will also generally be making zero accounting profit. d. will be forced to shutdown and leave the market.
b. is doing as well as typical firms in other markets.
If consumer incomes go up and you are analyzing the market for Ramen noodles (an inferior good), the effect on the demand for Ramen noodles, ceteris paribus, will be a. an upward movement along the demand curve for Ramen noodles. b. a downward movement along the demand curve for Ramen noodles. c. a rightward shift in the demand curve for Ramen noodles. d. a leftward shift in the demand curve for Ramen noodles.
d. a leftward shift in the demand curve for Ramen noodles.
If the income elasticity of a good is positive, we can conclude that the good is a. an inferior good. b. a necessity. c. a luxury good. d. a normal good.
d. a normal good.
Joab and his friends used to play a game where they put on a dog's electric fence collar and tried to stand over the electric fence line because, after careful consideration of the costs and benefits, they decided that the benefits of watching their friends get shocked outweighed the costs of being shocked themselves. According to the economic way of thinking, by playing this game, Joab and his friends were a. not fully considering the costs and benefits of their decision since this is obviously a mistake for anybody to do. b. making an irrational choice. c. not responding to the incentives they faced. d. making a rational choice.
d. making a rational choice.
The demand for the product of a competitive price-taker firm is a. perfectly inelastic. b. greater than zero but less than one. c. dependent on the availability of substitutes for the firm's product. d. perfectly elastic.
d. perfectly elastic.
According to the law of supply, a. more of a good will be offered by suppliers as the price rises. b. less of a good is desired by consumers as the price rises. c. more of a good is desired by consumers as the price falls. d. less of a good will be offered by suppliers as the price rises.
a. more of a good will be offered by suppliers as the price rises.
A firm that is a price taker can a. substantially change the market price of its product by changing its level of production. b. decide what price to charge for its product. c. sell some of its output at a price higher than the market price. d. sell all of its output at the market price.
d. sell all of its output at the market price.
Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a. an outward shift of the curve. b. a movement from a point on the curve to a point inside the curve. c. a movement from one point to another point along the curve. d. a flattening of the curve.
a. an outward shift of the curve.
Studies indicate the demand for cigarettes is highly inelastic, while the demand for green peas tends to be elastic. Other things constant, how will this affect the incidence of an excise tax on these products? a. Consumers will tend to bear a greater share of the burden of an excise tax on cigarettes than of an excise tax on peas. b. Consumers will tend to bear a greater share of the burden of an excise tax on peas than of an excise tax on cigarettes. c. Producers will bear a greater share of the burden of an excise tax on cigarettes than of an excise tax on peas. d. Uncertain; elasticity of demand exerts no impact on how the burden of an excise tax is distributed between consumers and producers.
a. Consumers will tend to bear a greater share of the burden of an excise tax on cigarettes than of an excise tax on peas.
Which of the following most accurately indicates the implications of an economy's production possibilities curve? a. If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. b. If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. c. Over time, it is generally impossible for a country to expand its production of goods. d. An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production.
a. If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs? a. You study eight hours for a final exam even though there is no way now that you can pass the course. b. You decide to purchase a piece of machinery for your business that will eliminate three employees' positions. c. You pay to have your car towed back to the repair shop because it was not fixed properly the first time. d. You decide to get a master's degree because you cannot find a job in the field in which you majored.
a. You study eight hours for a final exam even though there is no way now that you can pass the course.
Which of the following is not scarce? a. air b. bubble gum c. compact discs d. diamonds
a. air
When a reduction in the price of a good allows a consumer to purchase more of all goods, this effect is called the a. income effect. b. elasticity effect. c. monetary effect. d. substitution effect.
a. income effect.
A private owner of a resource has a strong incentive to a. conserve the resource for the future, particularly if it is expected to increase in value. b. use the resource today even if its value is expected to increase substantially in the future. c. use the resource in ways that impose harm on others. d. ignore the wishes of others when deciding how to use the resource.
a. conserve the resource for the future, particularly if it is expected to increase in value.
An increase in the demand for a product will cause the a. demand for and prices of the resources used to produce the product to increase. b. demand for and prices of the resources used to produce the product to decrease. c. demand for and prices of the resources used to produce the product to remain unchanged. d. price of the product to decrease.
a. demand for and prices of the resources used to produce the product to increase.
The burden of a tax will fall primarily on buyers when the a. demand for the product is highly inelastic and the supply is relatively elastic. b. demand for the product is highly elastic and the supply is relatively inelastic. c. tax is legally (statutorily) imposed on the seller of the product. d. tax is legally (statutorily) imposed on the buyer of the product.
a. demand for the product is highly inelastic and the supply is relatively elastic.
In the long run, a firm might experience rising per-unit costs due to a. diseconomies of scale. b. the law of supply. c. the law of diminishing marginal returns. d. economies of scale
a. diseconomies of scale.
The difference between zero accounting profit and zero economic profit is that a. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit. b. economists do not include opportunity cost in zero economic profit, while accountants do include opportunity cost in zero accounting profit. c. economists include opportunity cost in zero accounting profit, while accountants do not include opportunity cost in zero economic profit. d. economists do not include opportunity cost in zero accounting profit, while accountants do include opportunity cost in zero economic profit.
a. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit.
Suppose the athletic department wanted to increase revenues by decreasing ticket prices to softball games. This would make sense only if the price elasticity of demand for softball games was (in absolute value) a. greater than 1. b. equal to 1. c. less than 1. d. perfectly inelastic.
a. greater than 1.
In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of computers will increase the quantity supplied of computers." (II) "A technological advance that lowers the cost of producing computers will increase the supply of computers." a. in both statements I and II b. in statement I only c. in statement II only d. in neither statements I nor II
a. in both statements I and II
According to the law of supply, a. producers are willing to supply larger amounts of a good as its selling price increases. b. a direct relationship exists between the price of a good and the amount buyers choose to buy. c. an inverse relationship exists between the price of a good and the amount buyers wish to buy. d. an inverse relationship exists between the price of a good and the amount producers supply.
a. producers are willing to supply larger amounts of a good as its selling price increases.
High transaction costs will tend to a. reduce the number of mutually beneficial exchanges that occur. b. allow easier specialization according to the law of comparative advantage. c. increase the number of mutually beneficial exchanges that occur. d. increase the value created by exchanges in an economy.
a. reduce the number of mutually beneficial exchanges that occur.
Suppose the minimum average total cost (ATC) of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC) was $.80 per unit. If the market price was $.75 per unit, a profit-seeking firm would a. shut down immediately. b. produce where MR = MC in the short run. c. shut down in the long run but remain in business in the short run. d. do both b and c.
a. shut down immediately.
The value of a good is a. subjective. b. determined by a government statistical agency. c. objective. d. based on the cost of production.
a. subjective.
Which of the following economic guideposts is most consistent with this statement: "the widely held myth that red cars get more tickets has been shown to be false as data reveals that nearly 11% of all cars are red, but only 3% of all cars that receive traffic tickets are red". a. the test of a theory is its ability to predict events in the real world. b. people are rational in that they respond to the incentives they face and do those things where the benefits outweigh the costs. c. there is no such thing as a free lunch. d. decisions are made at the margin.
a. the test of a theory is its ability to predict events in the real world.
The fallacy of composition is the fallacious view that a. what is true for the individual will also be true for the group. b. it is possible for the whole to be greater than the sum of the individual parts. c. association does not necessarily indicate causation. d. economic activity will benefit everyone.
a. what is true for the individual will also be true for the group.
Marisole recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Marisole income elasticity for steak dinners is a. 2, making her demand for steak elastic b. 0.5, making steak a necessity for her c. 2, making steak a luxury for her d. 0.5, making her demand for steak inelastic
b. 0.5, making steak a necessity for her
Cupid has heard about the law of demand and wants to test this theory that people will buy less of a good as its price increases. He decides to study the relationship between the price of roses and the quantity of roses that people choose to buy. He notices that on Friday, February 14th (Valentine's Day), the price of roses increases, and yet people choose to buy even more Roses. He concludes that the law of demand is not a valid theory. Which of the following is true? a. Cupid performed an accurate test and has correctly concluded that the law of demand is not valid b. Cupid violated the ceteris paribus principle and, in doing so, probably reached a false conclusion c. Cupid has confused the law of demand with the law of supply d. Cupid has made the mistake of trying to test a normative, rather than positive, economic statement
b. Cupid violated the ceteris paribus principle and, in doing so, probably reached a false conclusion
Which of the following occurs when a surplus occurs in a market, free of any regulations, for a good? a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. b. Quantity supplied exceeds quantity demanded and the price falls, which encourages more consumption and less production. c. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. d. Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.
b. Quantity supplied exceeds quantity demanded and the price falls, which encourages more consumption and less production.
Which of the following is a primary difference between price takers and price searchers that operate in markets with low barriers to entry? a. The price searchers will maximize profits in the short run, but price takers will not. Price takers can only maximize profits in the long run. b. The price searchers will have to search for the price, while price takers will have to take the price determined in the market. c. The price searchers will be able to earn profit in the long run, but the price takers will not. d. The price searchers may be able to earn profit in the short run, but the price takers will not be able to do so.
b. The price searchers will have to search for the price, while price takers will have to take the price determined in the market.
The general student population at UCR saw its income increase by 20%, and as a result, Hong Kong Express, a local Chinese food restaurant, saw the quantity of Chinese food purchased increase by 30%. From this information, we can conclude that, for UCR students, Chinese food is a. a necessity b. a luxury good c. an inferior good d. an elastic good since price elasticity of demand is greater than 1
b. a luxury good
In the supply and demand model, a subsidy granted to buyers is illustrated by a. a leftward shift in the demand curve, by the per unit amount of the subsidy. b. a rightward shift in the demand curve, by the per unit amount of the subsidy. c. a leftward shift in the supply curve, by the per unit amount of the subsidy. d. a rightward shift in the supply curve, by the per unit amount of the subsidy.
b. a rightward shift in the demand curve, by the per unit amount of the subsidy.
Which of the following is the most likely outcome of minimum wage laws? a. an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms b. an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms c. a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms d. a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms
b. an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms
"I'm losing money, but having invested so much in equipment, I simply cannot afford to shut down." If the firm were attempting to maximize profit, this decision may be a. incorrect because a firm experiencing economic losses should never continue to operate; it is contrary to the idea of profit maximization. b. correct if the firm is covering its variable costs and expects the price of its product to rise in the near future. c. incorrect since the firm's fixed costs are sunk costs. d. correct if the firm is covering its fixed costs
b. correct if the firm is covering its variable costs and expects the price of its product to rise in the near future.
Scarcity implies that a. consumers are too poor to afford the goods and services available. b. it is impossible to completely fulfill the desire for goods and services with the limited resources available. c. consumers are willing to purchase more of a good at the current price than suppliers are willing to produce. d. consumers would be willing to buy the same quantity of a good at a higher price.
b. it is impossible to completely fulfill the desire for goods and services with the limited resources available.
A tax imposed on the sellers of a good a. raises both the price buyers pay and the net price received by sellers. b. raises the price buyers pay and lowers the net price received by sellers. c. lowers the price buyers pay and raises the net price received by sellers. d. lowers both the price buyers pay and the price received by sellers.
b. raises the price buyers pay and lowers the net price received by sellers.
When the government levies a tax in a market, some of the trades that would have occurred are now forgone. Economists call the losses from this forgone activity a. regressive taxation. b. the deadweight loss (or excess burden) of taxation. c. the neutrality of taxation. d. progressive taxation.
b. the deadweight loss (or excess burden) of taxation.
In economics, secondary effects refer to the a. best alternative that must be forgone as the result of a choice. b. unintended consequences of a change that are not immediately identifiable but are felt only with time. c. immediate and visible intended consequences of a change. d. impact of the scarcity of resources on the scarcity of the goods that are produced with those resources.
b. unintended consequences of a change that are not immediately identifiable but are felt only with time.
There are only two consumers in a market, Harry and Hermione. Harry is willing to by 10 magic wands when the price is $20 per wand and 6 magic wands when the price is $30 per wand. Hermione is willing to by 12 magic wands when the price is $20 per wand and 8 magic wands when the price is $30 per wand. Given that these are the only two individuals in the market, what is the market demand for wands when the price of wands is $30? a. 6 b. 8 c. 14 d. 22
c. 14
9. In Africa, which of the following policies has been most successful at increasing elephant populations? a. Banning the ivory trade by making the buying and selling of ivory illegal. b. Making elephants the common property of the people of the country through government ownership and control and making the killing of elephants illegal c. Allowing private ownership of elephants and making the ivory trade legal d. When used together, the policies in a and b have been more successful than the policy in c.
c. Allowing private ownership of elephants and making the ivory trade legal
The government imposes a tax on skittles. At the same time, the sugar lovers of America convention is being held which has drawn skittle consumers to the area. Given these two effects, what will happen to the equilibrium quantity and price of skittles? a. Equilibrium quantity will decrease, equilibrium price will increase. b. Equilibrium price will decrease; the effect on quantity is ambiguous. c. Equilibrium price will increase; the effect on quantity is ambiguous. d. Equilibrium quantity will increase; the effect on price is ambiguous.
c. Equilibrium price will increase; the effect on quantity is ambiguous.
In response to the Coronavirus outbreak, the government has removed all taxes from the production of hand-sanitizer. At the same time, in an effort to protect themselves from the virus, people are using more hand santizer than ever before. Given these two effects, what can we say about the equilibrium price and quantity of hand sanitizer? a. Equilibrium quantity will decrease, equilibrium price will increase. b. Equilibrium price will decrease; the effect on quantity is ambiguous. c. Equilibrium quantity will increase; the effect on price is ambiguous. d. Equilibrium price will increase; the effect on quantity is ambiguous.
c. Equilibrium quantity will increase; the effect on price is ambiguous.
Which of the following most accurately states the economic significance of exchange? a. Physical goods have value because they exist; exchange can neither increase nor decrease their value. b. Production of physical goods creates value; exchange merely redistributes this value. c. Exchange creates value by moving goods from parties who value them less to parties who value them more. d. Exchange reduces value since it consumes resources without adding to the physical supply of goods.
c. Exchange creates value by moving goods from parties who value them less to parties who value them more.
Which of the following most accurately describes the invisible hand concept? a. Wise central planning by government is necessary for the efficient use of resources. b. In a democratic setting, majority rule will result in the efficient use of resources. c. In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. d. In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society.
c. In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest.
Savannah is an attorney and also an excellent typist. She can type 120 words per minute, but charges attorney fees at $80 per hour. Matt would like some typing work but can only type 60 words per minute. The economic efficiency criterion indicates a. Matt should do the typing, provided he is paid more than $40 per hour. b. Matt should do the typing, provided he is willing to do so for less than $80 per hour. c. Matt should do the typing, provided he is willing to do so for less than $40 per hour. d. Savannah should do the typing.
c. Matt should do the typing, provided he is willing to do so for less than $40 per hour.;
How will an increase in the price of coffee affect the market for cocoa, a substitute good? a. The supply of cocoa will increase, leading to a reduction in the price of cocoa. b. The supply of cocoa will decrease, leading to an increase in the price of cocoa. c. The demand for cocoa will increase, leading to an increase in the price of cocoa. d. The demand for cocoa will decrease, leading to a reduction in the price of cocoa.
c. The demand for cocoa will increase, leading to an increase in the price of cocoa.
Which of the following best represents the idea of physical resources? a. natural gas used for cooking, heating and generating electricity b. J.K. Rowling's creativity and writing ability used to create the Harry Potter novels. c. The pencil you are writing with to take this test. d. All of the above are true.
c. The pencil you are writing with to take this test.
How would a decrease in the price of the feed grains used to feed cattle affect the market for beef? a. The demand for beef would increase, increasing beef prices. b. The demand for beef would decrease, decreasing beef prices. c. The supply of beef would increase, decreasing beef prices. d. The supply of beef would decrease, increasing beef prices.
c. The supply of beef would increase, decreasing beef prices.
If a surplus exists in a market we know that the actual price is a. below equilibrium price and quantity demanded is greater than quantity supplied. b. above equilibrium price and quantity demanded is greater than quantity supplied. c. above equilibrium price and quantity supplied is greater than quantity demanded. d. below equilibrium price and quantity supplied is greater than quantity demanded.
c. above equilibrium price and quantity supplied is greater than quantity demanded.
A profit-maximizing firm will continue to expand output a. as long as the revenues from the production and sale of an additional unit exceeds the average costs of the unit. b. until the average cost of producing the good or service is at a minimum. c. as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit. d. until the marginal cost of producing a good or service is at a minimum.
c. as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit.
If Harry Bartolini's Ford dealership sells Rosa Brown a new automobile for $30,000, economic analysis indicates that a. Mr. Bartolini will gain from the transaction, while Rosa Brown will lose. b. Rosa Brown will gain from the transaction, while Mr. Bartolini will lose. c. both parties to the transaction will gain. d. the well-being of both parties will be unchanged.
c. both parties to the transaction will gain.
With respect to the average cost curves, the marginal cost curve a. intersects average total cost, average fixed cost, and average variable cost at their minimum points. b. intersects average total cost, average fixed cost, and average variable cost at their maximum points. c. intersects both average total cost and average variable cost at their minimum points. d. intersects average total cost where it is increasing and average variable cost where it is decreasing.
c. intersects both average total cost and average variable cost at their minimum points.
The most important implicit cost generally omitted from the accounting statement of a firm is the a. rental cost of machinery. b. cost of compliance with government regulations. c. opportunity cost of the equity capital invested by the owners. d. accounting cost incurred as the result of tax compliance.
c. opportunity cost of the equity capital invested by the owners.
In the short run, a profit-maximizing firm in a price-taker market will definitely stop production if a. economic profit is zero. b. price falls below average total cost. c. price is less than average variable cost. d. it cannot completely cover its fixed costs.
c. price is less than average variable cost.
Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called a. consumer surplus. b. marginal cost. c. producer surplus. d. triangular arbitrage.
c. producer surplus.
Middlemen are individuals who a. add to the buyer's expense without performing a useful function. b. add to the seller's cost without performing a useful function. c. provide services that reduce the cost of transactions and help achieve additional gains from trade. d. act as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services.
c. provide services that reduce the cost of transactions and help achieve additional gains from trade.
A decrease in the price of milk will a. increase the demand for milk. b. reduce the demand for milk. c. reduce the demand for orange juice, a substitute for milk. d. do both a and c
c. reduce the demand for orange juice, a substitute for milk.
If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to a. fall. b. remain constant since the decrease in quantity sold is exactly offset by the price increase. c. rise. d. rise if it is a normal good and fall if it is an inferior good.
c. rise.
When entry barriers into a market are low, firms will tend to earn zero economic profit in the long run because a. low entry barriers lead to rising costs. b. profit-seeking entrepreneurs will not enter a market when entry barriers are low. c. short-run profit attracts additional suppliers and drives down the market price. d. consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs.
c. short-run profit attracts additional suppliers and drives down the market price.
The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average, a. the marginal is decreasing. b. the total is decreasing. c. the average is increasing. d. the average is decreasing.e.the marginal is increasing.
c. the average is increasing.
With a price ceiling above the equilibrium price, a. quantity demanded would exceed quantity supplied. b. quantity supplied would exceed quantity demanded. c. the market would be in equilibrium. d. the equilibrium price would be expected to fall over time.
c. the market would be in equilibrium.
The opportunity cost of going to college is a. zero, since a college education will allow a student to earn a larger income after graduation. b. zero for students who are fortunate enough to have all of their college expenses paid by someone else. c. the value of the best opportunity a student gives up to attend college. d. the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
c. the value of the best opportunity a student gives up to attend college.
The opportunity cost of an action is a. the monetary payment the action required. b. the total time spent by all parties in carrying out the action. c. the value of the best opportunity that must be sacrificed in order to take the action. d. the cost of all alternative actions that could have been taken, added together.
c. the value of the best opportunity that must be sacrificed in order to take the action.
Kathy works full time during the day as an economist and faces a 90 percent marginal tax rate. If Kathy were to get an offer to work a second job in the evenings doing consulting work for a local business for $10,000 per year, how much of this additional income would she be able to keep as net pay after taxes? a. $10,000 b. $4,000 c. $6,000 d. $1,000
d. $1,000
When the price of boxing gloves goes from $20 to $30, the quantity demanded decreases from 80 to 20. Over this price range, the absolute value of the price elasticity of demand is a. 0.33, making the demand for boxing gloves inelastic b. 0.33, making the demand for boxing gloves elastic c. 3.00, making the demand for boxing gloves inelastic d. 3.00, making the demand for boxing gloves elastic
d. 3.00, making the demand for boxing gloves elastic
There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run? a. Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease. b. Many firms will enter the market and each firm will eventually operate at a loss. c. Nothing, because each firm is already maximizing its profits. d. Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business.
d. Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business.
Which of the following would be the most likely consequence of minimum wage laws that establishes a wage rate above the market equilibrium wage? a. Some minimum wage workers would get to keep their jobs at this higher wage, and thus be made better off by this policy. b. Some minimum wage workers would lose their jobs since this new wage exceeds their productivity, and thus be made worse off by this policy. c. While this new minimum wage would result in some workers having more money to spend, it would also likely result in higher prices for the products that they buy, and so the amount of products that they purchase might not change at all. d. All of the above.
d. All of the above.
Which of the following is an implication of the law of diminishing returns? a. A doubling of all inputs will lead to more than a doubling of output. b. Total output will decline as more workers are hired. c. In the long run, average total cost will eventually decline as output is expanded. d. In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.
d. In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.
During the short-run period of the production process, a firm will be a. able to vary the size of its plant. b. unable to vary any of its factors of production. c. able to vary all of its factors of production. d. able to vary only some of its factors of production.
d. able to vary only some of its factors of production.
Private property rights involve a. the right to exclusive use of the property. b. legal protection against those who would seek to use or abuse the property without the owner's permission. c. the right to transfer, sell, exchange, or mortgage the property. d. all of the above.
d. all of the above.
The economic way of thinking stresses that a. only material goods lead to happiness. b. greed is the primary motivation for human action. c. an objective value can be attached to physical goods. d. as the cost of an option increases, people will be less likely to choose that option.
d. as the cost of an option increases, people will be less likely to choose that option.
As people have more time to adjust to a price change, a. demand becomes more elastic, and supply becomes less elastic. b. demand becomes less elastic, and supply becomes more elastic. c. both supply and demand become less elastic. d. both supply and demand become more elastic.
d. both supply and demand become more elastic.
A subsidy given to students to help them pay for higher education will a. increase the amount of out-of-pocket expenses students pay for higher education, decrease the amount that universities will charge in tuition fees, and decrease the equilibrium quantity of college education being bought and sold. b. increase the amount of out-of-pocket expenses students pay for higher education, increase the amount that universities will charge in tuition fees, and increase the equilibrium quantity of college education being bought and sold. c. decrease the amount of out-of-pocket expenses students pay for higher education, have no effect on university tuition fees, and increase the equilibrium quantity of college education being bought and sold without costing us anything since the subsidy is provided by the government and, thus, doesn't cost anybody else anything. d. decrease the amount of out-of-pocket expenses students pay for higher education, increase the amount that universities will charge in tuition fees, and increase the equilibrium quantity of college education being bought and sold.
d. decrease the amount of out-of-pocket expenses students pay for higher education, increase the amount that universities will charge in tuition fees, and increase the equilibrium quantity of college education being bought and sold.
If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a: a. steep (inelastic) demand curve and steep (inelastic) demand curve. b. flat (elastic) demand curve and a flat (elastic) supply curve. c. steep (inelastic) demand curve and a flat (elastic) supply curve. d. flat (elastic) demand curve and a steep (inelastic) supply curve.
d. flat (elastic) demand curve and a steep (inelastic) supply curve.
If a restaurant in a summer tourist area is highly profitable during the summer months but unable to cover even its variable costs during the winter months, the restaurant should a. go out of business immediately, because no firm should continue to operate if it is losing money; doing so is contrary to the idea of profit maximization. b. go out of business during the summer and only remain open during the winter months. c. operate during all months of the year as long as its profits during the summer exceed its losses during the winter. d. shut down during the winter, but continue operating during the summer as long as the summer profits exceed the losses (fixed costs) during the winter shutdown period.
d. shut down during the winter, but continue operating during the summer as long as the summer profits exceed the losses (fixed costs) during the winter shutdown period.
When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the a. income effect. b. price effect. c. consumer equilibrium effect. d. substitution effect.
d. substitution effect.