FML I hate econ
An increase in supply will cause A) an increase in demand. B) a decrease in demand. C) an increase in quantity demanded. D) a decrease in quantity demanded. E) an increase in equilibrium price.
an increase in the quantity demanded
Other things being equal, the effect of an increase in the price of milk would be illustrated by A) an upward movement along the demand curve for milk. B) a leftward shift in the demand curve for milk. C) a downward movement along the demand curve for milk. D) a rightward shift in the demand curve for milk.
an upward movement along the demand curve for milk
If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be A) $40. B) $60. C) $6,000. D) $8,000.
$6,000
Jayden can produce 10 pens or 20 pencils in one hour while Alexander can produce 15 pens or 5 pencils in one hour. Which of the following statements is correct? A) Alexander has a comparative advantage over Jayden in the production of pencils B) Alexander has a comparative advantage over Jayden in the production of pens C) Jayden has a comparative advantage over Alexander in the production of pens D) Alexander and Jayden cannot gain from specialization and exchange.
Alexander has a comparative advantage over jayden in the production of pens
Andrew buys yogurt, and he would be willing to pay more than he now pays. Suppose that Andrew has a change in his tastes such that he values yogurt more than before. If the market price is the same as before, then A) Andrew's consumer surplus would be unaffected. B) Andrew's consumer surplus would increase. C)Andrew's consumer surplus would decrease. D) Andrew would be wise to buy less yogurt than before.
Andrew's consumer surplus would increase
Which of the following reflects diseconomies of scale? A)Marginal product decreases as output increases. B)Short-run marginal cost increases as output increases. C) Long-run marginal cost increases as output increases. D) Short-run average cost increases as output increases. E) As output doubles, long-run total cost more than doubles.
As output doubles, long-run total cost more than doubles
The price elasticity of demand for a commodity is determined primarily by the A) size of the consumer surplus. B) attractiveness of the substitutes for the good. C) incomes of consumers. D) availability of complementary goods.
Attractiveness of the substitutes for the good
The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference? A) Cows can be privately owned while in many countries elephants can not. B) The demand for ivory far exceeds the demand for beef. C) Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses. D) People tend to protest more every year to prevent cow extinction than they do for elephant extinction.
Cows can be privately owned while in many countries elephants cannot
Assume that supply increases greatly and demand increases slightly. Which of the following will happen? A) Equilibrium price will fall and equilibrium quantity will rise. B) Equilibrium price will rise and equilibrium quantity will fall. C) Equilibrium price will rise and equilibrium quantity will rise. D) Equilibrium price will fall and equilibrium quantity will fall. E) Neither equilibrium price nor equilibrium quantity will change.
Equilibrium price will fall and equilibrium quantity will rise
Suppose demand increases and supply decreases. Which of the following will happen? A) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. B) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. C) Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. D) Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. E) The change in equilibrium price and quantity cannot be determined.
Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase
If fixed cost at quantity (Q) = 100 is $130, then A) fixed cost at Q = 0 is $0. B) fixed cost at Q = 0 is less than $130. C) fixed cost at Q = 200 is $260. D) fixed cost at Q = 200 is $130. E) it is impossible to calculate fixed costs at any other quantity.
Fixed cost at Q=200 is $130
When oil prices increased to record levels in the 1970s, salaries dramatically increased for petroleum geologists skilled in finding oil. Those geologists who moved from other areas to the higher paying jobs were A) seeking to profit from society's needs rather than following the guidance of the invisible hand, which would have led them to seek jobs serving society rather than jobs with higher pay. B) following the guidance of the invisible hand and probably serving society's best interests as well as their own. C) causing oil prices to rise even more by moving to jobs with higher salaries. D) helping themselves but hurting the economy.
Following the guidance of the invisible hand and probably serving society's best interests as well as their own
Under competitive conditions, market prices A) generally convey little information about the value and cost of goods. B) do not usually have much of an effect on the decisions of individuals. C) are incapable of coordinating the actions of buyers and sellers. D) generally bring the self-interest of individuals into harmony with the general welfare.
Generally bring the self-interest of individuals into harmony with the general welfare
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.
In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest
A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.65. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to A) decrease tuition, which should boost enrollment enough to balance the budget. B) decrease tuition, which would bring in more revenue. C) leave tuition as is-an increase would not help balance the budget. D) increase tuition, which would generate more revenue.
Increase tuition, which would generate more revenue
With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy? A) Passage of legislation reducing the workweek to 30 hours. B) Instituting a tax policy encouraging consumption at the expense of investment. C) Instituting a tax policy encouraging investment at the expense of consumption. D) An increase in the marginal income tax rate, which would reduce the work effort of individuals.
Instituting a tax policy encouraging investment at the expense of consumption
If price rises, what happens to quantity supplied of a product? A) It increases. B) It decreases. C) It does not change. D) Quantity supplied is constant, but supply increases.
It increases
The statement, "John buys more of good X as his income increases, ceteris paribus," means A) John's income is being held constant. B) John's purchases of good X are being held constant. C) John's income and purchases of this good are being held constant. D) John's income is the only influence that is being allowed to change. E) the price of this good is being allowed to change.
John's income is the only influence that is being allowed to change
The economizing problem is essentially one of deciding how to make the best use of A) limited resources to satisfy limited wants. B) unlimited resources to satisfy limited wants. C) limited resources to satisfy virtually unlimited wants. D) unlimited resources to satisfy unlimited wants.
Limited resources to satisfy virtually unlimited wants
Which of the following statements is correct about the economic way of thinking? A) If the buyer of a good gains, the seller must lose an equal amount. B) The value of goods is objective; it is equal to the cost of supplying the good. C) Opportunity costs will always be incurred when scarce resources are used to produce a good. D) Changes in incentives generally have no effect on human behavior.
Opportunity costs will always be incurred when scarce resources are used to produce a good
Because of a late night out with friends, Ayana decided to sleep in rather than attend her 8:00 a.m. economics class. According to economic analysis, her choice was A) irrational, because economic analysis suggests you should always attend classes that you have already paid for. B) irrational, because oversleeping is not in Ayana's self-interest. C)rational only if Ayana has not missed any other classes. D) rational if Ayana values sleep more highly than the benefit she expects to receive from attending the class.
Rational if ayana values sleep more highly than the benefit she expects to receive from attending the class
Ethan washes and irons his own shirts. Sophia, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference? A) Ethan must enjoy ironing more than Sophia does. B) Ethan must be better at ironing than Sophia is. C) The opportunity cost of ironing is greater for Ethan. D) Sophia has a higher opportunity cost of laundering her clothes than Ethan does.
Sophia has a higher opportunity cost of laundering her clothes than Ethan does
Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation? A)Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. B) Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. C) Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. D) Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.
Supply and demand simultaneously increased and the shift in supply was less than the shift in demand
In voluntary exchange, if the seller of a product gains, A) the buyer will generally lose an amount greater than the gain to the seller. B) the buyer must lose an amount equal to what the seller gains. C) someone else must lose an equal amount. D) the buyer must also gain; mutual gain provides the foundation for exchange.
The buyer must also gain; mutual gain provides the foundation for exchange
If there is a decrease in both the supply and demand for a good, which of the following will definitely occur? A) The price of the good will increase. B) The price of the good will decrease. C) The equilibrium quantity will increase. D) The equilibrium quantity will decrease.
The equilibrium quantity will decrease
A professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless A) the marginal cost of teaching increased. B) the marginal benefit of teaching increased. C) the marginal cost of teaching decreased. D) the marginal benefit of a corporate job decreased.
The marginal cost of teaching increased
Which of the following is an example of a normative economic statement? A) The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. B) The economy grew at an annual rate of 5 percent during the first quarter of this year. C) If two automobile companies merge, it is likely that the price of automobiles will rise. D) An increase in international trade benefits some workers but hurts others. E) The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.
The minimum wage should be increased so that low income workers can afford to keep up with the cost of living
Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product? A) The price of orange juice will increase, and the quantity purchased will fall. B) The price of orange juice will fall, and the quantity purchased will increase. C) The price of orange juice will increase, and the quantity purchased D) The price of orange juice will fall, and the quantity purchased will fall.
The price of orange juice will fall, and the quantity purchased will fall
Other things equal, the demand for a good tends to be more inelastic when A) there are fewer available substitutes. B) a longer time period is considered. C) the good is considered a luxury good. D) the market for the good is more narrowly defined.
There are fewer available substitutes
If air travel and bus travel are substitutes, A) an increase in the price of bus travel will decrease the demand for air travel. B) a decrease in the price of bus travel will decrease the demand for air travel. C) n increase in the price of bus travel will generally have no effect on the demand for air travel. D) an increase in the price of bus travel will shift the demand curve for air travel to the left.
a decrease in the price of bus travel will decrease the demand for air travel
Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause A) an increase in the supply of piercings and a lower price for piercings. B) an increase in the supply of piercings and a higher price for piercings. C) a decrease in the supply of piercings and a higher price for piercings. D) a decrease in the supply of piercings and a lower price for piercings.
a decrease in the supply of piercings and a higher price for piercings
Assuming that bus travel is an inferior good, a decrease in consumer income, other things being equal, will cause A) a downward movement along the demand curve for bus travel. B) no change in the demand curve for bus travel. C) an upward movement along the demand curve for air travel. D) a rightward shift in the demand curve for bus travel.
a rightward shift in the demand curve for bus travel
Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in A) a wider variety of products and higher prices. B) less product variety and higher prices. C) a wider variety of products and lower prices. D) less product variety and lower prices.
a wider variety of products and higher prices
For most firms, the major difference between accounting profit and economic profit is that A) explicit and implicit costs are included in the accounting profit while only explicit costs are included in economic profit. B) accounting profit omits the salaries of managers, and therefore, it is generally greater than economic profit. C) accounting profit is based on opportunity cost, whereas economic profit is based on market transactions. D) accounting profit does not consider the opportunity cost of the firm's equity capital and, therefore, generally overstates economic profit.
accounting profit does not consider the opportunity cost of the firm's equity capital and, therefore, generally overstates economic profit.
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) Nothing, because each firm is already maximizing its profits. B) Many firms will enter the market and each firm will eventually operate at a loss. C) 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, but the price will remain the same because the existing firms will not allow price to decrease.
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
Why is trade an important source of economic progress? A) It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. B) It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. C) It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. D) All of the above are correct.
all of the above
In the short run, the firm's average fixed costs A) always increase as output increases. B) always decline as output increases. C) equal zero. D) remain constant as output expands.
always decline as output increases
Which of the following would increase a firm's average total costs? A) Economies of scale. B) An increase in input prices. C) An improvement in technology. D) An increase in demand for the firm's product.
an increase in input prices
Cartel agreements are difficult to maintain because individual members A) can gain by raising their price above the price that is best for the cartel. B) are often unable to police the price and output policies of other members. C) can gain by secretly raising their price above the price that is best for the cartel. D) can enforce price arrangements vigorously in court.
are often unable to police the price and output policies of other members
A monopolist will earn economic profits as long as price exceeds A) marginal revenue. B) average fixed cost. C) average variable cost. D) average total cost.
average total cost
If there is a decrease in demand for picture frames, we would expect A) both the price and quantity sold to increase. B) both the price and quantity sold to decrease. C) the price to decrease and the quantity sold to increase. D) the price to increase and the quantity sold to decrease.
both the price and quantity sold to decrease
A firm that uses price discrimination to enhance its revenues will A) expand output as long as price exceeds average total costs. B) expand output as long as average total costs are declining. C) charge a higher price to consumers with a more elastic demand for the firm's product. D) charge a lower price to consumers with a more elastic demand for the firm's product.
charge a lower price to customers with a more elastic demand for the firm's product
To be economically successful, the entrepreneur must A) combine resources in a manner that increases their value. B) produce a good that consumers value less than the resources used to produce it. C) use only personal financial capital to avoid the interest payments that would have to be paid if the money is borrowed from the bank. D) transform or rearrange resources to maximize the entrepreneur's cost of production
combine resources in a manner that increases their value
The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that A) consumers are not aware of airline prices. B) consumer demand is unrelated to prices. C) consumer demand becomes more elastic as departure time approaches. D) consumer demand becomes more inelastic as departure time approaches.
consumer demand becomes more inelastic as departure time approaches
The two conflicting tendencies that a firm has in an oligopolistic industry are the incentive to A) cheat to maximize joint profits and the incentive to raise prices. B) cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. C) increase output in order to minimize per-unit costs and the incentive to reduce price in order to maximize joint profit. D) cooperate to maximize joint profits and the incentive to cheat on the agreement in order to increase the firm's share of the profit.
cooperate to maximize joint profits and the incentive to cheat on the agreement in order to increase the firm's share of the profit
Which of the following is an implication of the law of comparative advantage? A) Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities. B) Since workers in high-income countries utilize larger amounts of capital than workers in less developed nations, trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries. C) Countries that are high cost producers of agricultural products should trade those products for goods they can produce only at a low opportunity cost. D) Countries that are low opportunity cost producers of timber products should trade those products for goods they can produce only at a high opportunity cost.
countries that are low in opportunity cost producers of timber products should trade those products for goods they can produce only at a high opportunity cost
Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to A) determine the prices of goods and resources. B) allocate goods that are essential to life. C) determine the distribution of income among citizens. D) define and enforce private-property rights and designate the acceptable forms of competitive economic behavior.
define and enforce private-property rights and designate the acceptable forms of competitive economic behavior
Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is A) elastic. B) inelastic. C) of unitary elasticity. D) perfectly inelastic.
elastic
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.
exchange creates value by moving goods from parties who value them less to parties who value them more
If people buy less flowers at every price when their incomes fall, then A) flowers are a normal good. B) the demand for flowers is positively sloped. C) demand for flowers has increased. D) the price of flowers has increased. E) there has been a decrease in population that changed demand.
flowers are a normal good
The economic way of thinking stresses that A)changes in personal costs and benefits generally fail to exert much impact on behavior. B) incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. C) if one individual gains from an economic activity, then someone else must lose and in the same proportion. D) if a good is provided by the government, its production will not consume valuable scarce resources.
incentives matter--individuals respond in predictable ways to changes in personal costs and benefits
The entry of new firms into a competitive market will A) increase market supply and increase market prices. B) increase market supply and decrease market prices. C) decrease market supply and increase market prices. D) decrease market supply and decrease market prices.
increase market supply and decrease market prices
A profit-maximizing monopolist that produces in the short run will A) produce the level of output where marginal revenue exceeds marginal cost by the largest amount. B) increase output as long as the marginal revenue exceeds the marginal cost of producing that unit. C) produce the level of output where average total cost is at a minimum. D) increase price as long as the average revenue exceeds the average total cost. E) produce the level of output where average revenue exceeds average total cost by the largest amount.
increase output as long as the marginal revenue exceeds the marginal cost of producing that unit
In Atlanta, tickets for professional and college football games are substitutes. An increase in the ticket price for professional football, other things being equal, will A) increase the demand for college football tickets. B) decrease the demand for college football tickets. C) not change the demand for college football tickets. D) decrease the demand for professional football games.
increase the demand for college football tickets
If the demand for a good is elastic, then total revenue A) increases as price increases. B) remains constant as quantity demanded increases. C) increases as price decreases. D) decreases as quantity demanded increases. E) decreases as price decreases.
increases as price decreases
The demand for salt is A) inelastic because there are few substitutes for salt and it represents a large percentage of a consumer's budget. B) inelastic because there are many substitutes for salt and it represents a large percentage of a consumer's budget. C) inelastic because there are few substitutes for salt and it represents a small percentage of a consumer's budget. D) elastic because there are no substitutes for salt and it represents a large percentage of a consumer's budget. E) elastic because there are many substitutes for salt and it represents a large percentage of a consumer's budget.
inelastic because there are few substitutes for salt and it represents a small percentage of a consumer's budget
The difficulty in analyzing oligopolistic behavior arises from the A) degree of government regulation of the market structure. B) interdependent nature of oligopolistic decisions. C) large number of firms in the industry. D) market power of consumers.
interdependent nature of oligopolistic decisions
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. E) intersects only average total cost at its minimum point.
intersects both average total cost and average variable cost at their minimum points
When members of an oligopolistic industry agree to collude, raising their product price substantially above average cost, the passage of time (months and years) A) is usually needed for the members to solidify their cooperation. B) usually results in finer control of prices and markets by the group and larger profit margins. C) is likely to erode the agreement, as ways to cheat are developed by some participants and new entry is encouraged by the high price. D) seldom has any impact on the agreement, as long as the participants maintain high profit levels as a result of the agreement.
is likely to erode the agreement, as ways to cheat are developed by some participants and new entry is encouraged by the high price
If a firm enlarges its factory size and realizes higher average costs of production then A) it has experienced economies of scale. B) it has experienced diseconomies of scale. C) it has experienced constant returns to scale. D) the long-run average cost curve slopes downward. E) the long-run average cost curve shifts upward.
it has experienced diseconomies of scale
The key element in preserving a monopoly is A) government subsidy of critical enterprises. B) keeping potential rivals out of the market. C) guaranteeing availability of substitute products. D) increased advertising expenditure.
keeping potential rivals out of the market
Suppose that a price-discriminating firm divides its market into two segments. If the firm sells its product for a price of $22 in the market segment where demand is relatively less elastic, the price in the market segment whose customers' demand is more elastic will be A) $22. B) greater than $22. C) less than $22. D) $22 plus average fixed costs
less than $22
If a firm in a competitive price-searcher market raises its price, it will A) lose all of its sales. B) increase its sales. C) lose only some of its sales. D) have to go out of business.
lose only some of its sales
If a firm in a competitive price-searcher market finds that its marginal revenue exceeds its marginal cost at the current rate of output, it should A) raise the price of the product and expand its output. B) raise the price of the product and reduce its output. C) lower the price of the product and expand its output. D) lower the price of the product and reduce its output.
lower the price of the product and expand its output
Which of the following must be true if average total costs are declining? A) Marginal cost is less than average total cost. B) Marginal cost is less than average variable cost. C) Marginal cost is greater than average total cost. D) Marginal cost equals average total cost.
marginal cost is less than average total cost
Which of the following must be true if average variable costs are decreasing? A) Average fixed cost exceeds average total cost. B) Marginal cost exceeds average variable cost. C) Marginal cost is less than average variable cost. D) Marginal cost is less than average total cost.
marginal cost is less than average variable cost
Which of the following best explains why economists are generally critical of unregulated monopolists? A) Monopolists do not try to minimize their costs of production. B) Monopolists produce where marginal revenue is greater than marginal costs. C) Monopolists attempt to produce too many products, and as a result, their prices are high, and consumers waste time trying to choose between too many options. D) Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them.
monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them
When competition is present, self-interested business decision makers have a strong incentive to A) produce efficiently. B) ignore the wishes of customers who are also self-interested. C) adopt technological improvements slowly in order to avoid making wrong decisions D) maximize price in order to maximize profits.
produce efficiently
In order to be successful in a competitive market economy, an entrepreneur must A) provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere. B) supply consumers with goods and services valued less highly than the resources necessary to produce them. C) take resources from other producers, thus reallocating wealth but not creating new wealth. D) gain government grants and subsidies.
provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere
A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit? A) Raise price and lower output. B) Lower price and lower output. C) Raise price and raise output. D) Lower price and raise output. E) Lower output but leave price unchanged.
raise price and lower output
When the marginal cost of a price-taker firm is more than the market price of its product, the firm should A) expand output. B) reduce output. C) maintain output. D) charge more than the market price.
reduce output
If marginal cost exceeds marginal revenue, a profit-maximizing firm should A) expand output until marginal cost equals marginal revenue. B) expand output until marginal revenue equals price. C) reduce output until marginal cost equals marginal revenue. D) reduce output until price equals average total cost.
reduce output until marginal cost equals marginal revenue
When profits exist in a competitive price-searcher market, A) rival firms will be attracted into the market. B) high barriers to entry will prevent rival firms from entering the market. C) product differentiation will prevent new firms from making a profit. D) the profits will persist because the firms face a downward-sloping demand curve.
rival firms will be attracted into the market
Over time, an increase in a nation's stock of physical capital will A) shift the production possibilities curve inward. B) cause an economy to operate inside its production possibilities curve. C) shift the production possibilities curve outward. D) eliminate the basic economic problem of scarcity.
shift the production possibilities curve outward
When a firm exits a competitive price-searcher market, the individual demand curves faced by all remaining firms in that market will A) shift in a direction that is unpredictable without further information. B) shift to the right. C) shift to the left. D) remain unchanged. It is the supply curve that will shift.
shift to the right
When would sunk costs be irrelevant for current decision making? A) When the sunk costs are computed using accounting methods. B) When the sunk costs are greater than variable costs. C) When the sunk costs have been incurred only a short time ago. D) Sunk cost are always irrelevant when making current decisions.
sunk costs are always irrelevant when making current decisions
A decrease in the price of leather used to make shoes would cause the A) demand for shoes to decrease. B) demand for shoes to increase. C) supply of shoes to decrease. D) supply of shoes to increase.
supply of shoes to increase
If a movie theater is going to gain by charging students a dollar less than other customers, A) the demand of students must be more elastic than that of other customers. B) the demand of students must be less elastic than that of other customers. C) students must have higher incomes than other customers. D) other customers must enjoy movies more than students.
the demand of students must be more elastic than that of other customers
In the short run, a firm will eventually experience rising average total costs because of A) economies of scale. B) diseconomies of scale. C) the law of supply. D) the law of diminishing returns.
the law of diminishing returns
Which of the following is the most likely effect of higher chicken prices on the price and quantity purchased of beef, a substitute product? A) The price of beef will increase, and the quantity purchased will fall. B) The price of beef will fall, and the quantity purchased will increase. C) The price of beef will increase, and the quantity purchased will increase. D) The price of beef will fall, and the quantity purchased will fall.
the price of beef will increase, and the quantity purchased will increase
If entry-restricting legal barriers effectively organized the funeral home industry of a large city into a monopoly cartel, economic theory indicates that, compared to the previously competitive situation, A) the price of funeral services would decline, and output would increase. B) both the price and output of funeral services would decline. C) the price of funeral services would increase, and output would decline. D) both the price and output of funeral services would increase.
the price of funeral services would increase, and output would decline
If the ice cream industry is a competitive price-taker market and all ice cream producers are earning zero economic profit, what will be the impact of an increase in the demand for ice cream? A) Firms will exit the ice cream industry in the long run since they are earning zero economic profit. B) The firms will now be able to earn long-run economic profit assuming that barriers to entry remain low and new firms can enter the market. C) A shortage of ice cream will develop. D) The price of ice cream will rise initially, inducing the existing firms to expand output and new firms to enter the industry.
the price of ice cream will rise initially, inducing the existing firms to expand output and new firms to enter the industry
The price of a good will tend to fall when A) there is excess demand for the good. B) there is excess supply of the good. C) demand for the good increases. D) the supply of the good decreases.
there is excess supply of the good
The owners of a firm are earning economic profit if A) return on their capital is lower than the opportunity cost of employing that capital in their industry. B) their total revenues exceed the monetary payments to labor and other resources in the long run after all plant size adjustments are made. C) price exceeds average variable costs at the shutdown point. D) they are earning a return on their capital that is higher than what can generally be earned in other markets.
they are earning a return on their capital that is higher than what can generally be earned in other markets
What role do losses play in a competitive price-searcher market? A) They penalize a firm for producing a differentiated product. B) They signal that more resources are needed in a particular market. C) They show firms that barriers to entry are high. D) They send a message that more value would be created if the resources were used to produce other goods.
they send a message that more value would be created if the resources were used to produce other goods
Which of the following statements about entrepreneurs is most accurate? A) They will prosper if they undertake projects that increase the value of the resources. B) They are people who extend loans to other business decision makers. C) They are managers who generally work for a salary because they are unwilling to take risks. D) They will prosper if they charge prices higher than their rivals.
they will prosper if they undertake projects that increase the value of the resources
Which of the following describes a situation in which demand must be elastic? A) The price of dish soap rises by $0.10, and quantity of dish soap demanded falls by 50 units. B) The price of dish soap rises by $0.10, and total revenue rises. C) A 20 percent increase in the price of dish soap leads to a 20 percent decrease in the quantity of dish soap demanded. D) Total revenue does not change when the price of dish soap rises. E) Total revenue decreases when the price of dish soap rises.
total revenue decreases when the price of dish soap rises
Which of the following describes a situation in which demand must be inelastic? A) Total revenue decreases by 10 percent when the price of jeans rises by 10 percent. B) Total revenue decreases by less than 10 percent when the price of jeans rises by 10 percent. C) Total revenue increases by more than 10 percent when the price of jeans rises by 10 percent. D) Total revenue decreases by $10 when the price of jeans rises by $10. E) Total revenue decreases by more than $10 when the price of jeans rises by $10.
total revenue increases by more than 10 percent when the price of jeans rises by 10 percent
If a profit-maximizing firm shuts down in the short run, it must be true that before the shutdown, at all positive output levels, A) average total cost was less than average variable cost. B) fixed cost was greater than total revenue. C) variable cost was greater than total revenue. D) profit was zero. E) total cost plus total revenue was less than profit.
variable cost was greater than total revenue
