Micro Final Study Guide
The economic perspective entails: a) a comparison of marginal benefits and marginal costs in decision making b) rejection of the scientific method c) irrational behavior by individuals and institutions d) short-term but not long-term thinking
a) a comparison of marginal benefits and marginal costs in decision making
A quasi-public good is: a) a good for which exclusion could take place but that has such large spillover benefits that government provides it to prevent an under allocation of resources b) a public good that is produced profitably by private firms, without government subsidy c) one characterized by non rivalry and non excludability d) one characterized by rivalry but not excludability
a) a good for which exclusion could take place but that has such large spillover benefits that government provides it to prevent an under allocation of resources
The mutual interdependence that characterizes oligopoly arises because: a) a small number of firms produce a large proportion of industry output b) the demand curves of firms are kinked at the prevailing price c) the products of various firms are differentiated d) the products of various firms are homogenous
a) a small number of firms produce a large proportion of industry output
If we say that two variables are directly related, this means that: a) an increase in one variable is associated with an increase in the other variable b) the relationship between the two is purely random c)the two graph as a down sloping line d) an increase in one variable is associated with a decrease in the other variable.
a) an increase in one variable is associated with an increase in the other variable
If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to: a) average total cost b) marginal revenue c) minimum average fixed cost d) marginal cost
a) average total cost
An economists for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: a) bicycles are normal goods b) there are a few goods that are substitutes for bicycles c) there are many goods that are substitutes for bicycles d) there many goods that are complementary to bicycles
a) bicycles are normal goods
An increase in money income shifts the consumer's: a) budget line to the right b) budget line to the left c) indifference curves to the left d) indifference curves to the right
a) budget line to the right
In the simple circular flow model: a) business are sellers of final products b) there are real flows of goods, services, and resources, but not money flows c) households are buyers of resources d) households are seller of final products
a) business are sellers of final products
The study of economics is primarily concerned with: a) choices that are made in seeking to use scarce resources efficiently. b) determining the most equitable distribution of society's output. c) demonstrating that capitalistic economics are superior to socialistic economies. d) keeping private businesses from losing money.
a) choices that are made in seeking to use scare resources efficiently
The demand for a product is inelastic with respect to price if: a) consumers are largely unresponsive to a per unit price change b) the elasticity coefficient is greater than 1 c) a drop in price is accompanied by a decrease in the quantity demanded d) a drop in price is accompanied by an increase in the quantity demanded
a) consumers are largely unresponsive to a per unit price change
The theory of consumer behavior assumes that: a) consumers behave rationally, maximizing their satisfaction b) consumers have unlimited money incomes c) consumers do not know how much marginal utility they obtain from successive units of various products d) marginal utility is constant
a) consumers behave rationally, maximizing their satisfaction
To the economist total cost includes: a) explicit and implicit costs, including a normal profit b) neither implicit nor explicit costs c) implicit, but not explicit, costs d) explicit, but not implicit costs
a) explicit and implicit costs, including a normal profit
X-inefficiency refers to a situation in which a firm: a) fails to achieve the minimum average total costs attainable at each level of output b) fails to realize all existing economies of scale c) is not as technologically progressive as it might be d) encounters diseconomies of scale
a) fails to achieve the minimum average total costs attainable at each level of output
The Herfindahl Index: a) gives much greater weight to larger firms than to smaller firms in an industry b) tells us whether oligopolistic firms are engaging in collusion c) measures the prices charged by oligopolistic manufacturers d) is another name for the four-firm concentration ratio
a) gives much greater weight to larger firms than to smaller firms in an industry
Consumers sovereignty refers to the: a) idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer demands b) fact that resource prices are higher than product prices in capitalistic economies c) fact that a Federal agency exists to protect consumers from harmful and defective products d) idea that the pursuit of self-interest is in the public interest
a) idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer demands
A monopolistically competitive firm's marginal revenue curve: a) is downsloping and lies below the demand curve b) is downsloping and coincides with the demand curve c) does not exist because the firm is a "price maker" d) coincides with the demand curve and is parallel to the horizontal axis
a) is downsloping and lies below the demand curve
The nondiscriminating pure monopolist's demand curve: a) is identical to its marginal revenue curve b) is the industry demand curve c) shows a direct or positive relationship between price and quantity demanded d) tends to be inelastic at high prices and elastic at low prices
a) is identical to its marginal revenue curve
Marginal cost: a) is the rate of change in total fixed cost that results from producing one more unit of output b) rises for a time, but then begins to decline when diminishing returns set in c) is the difference between total cost and total variable cost d) equals both average variable cost and average total cost at their respective minimums
a) is the rate of change in total fixed cost that results from producing one more unit of output
The two general types of economic systems that exist today are: a) market systems and command systems b) laissez faire systems and pure command systems c) socialism and central planning d) market systems and capitalism
a) market systems and command systems
Pure monopolists may obtain economic profits in the long run because: a) of barriers to entry b) of advertising c) of rising average fixed costs d) marginal revenue is constant as sales increase
a) of barriers to entry
In introducing the opportunity cost of time into the theory of consumer behavior we find that, all else equal: a) one should consume less of time-intensive goods b) one should consume more of time-intensive goods c) the consumer's equilibrium position is not altered d) the marginal utility derived from each product must be multiplied by consumption time in determining equilibrium
a) one should consume less of time-intensive goods
Barriers to entry in oligopolistic may consist of: a) ownership of essential resources b) diseconomies of scale c) patent expirations d) diminishing returns
a) ownership of essential resources
The largest category of Federal spending is for: a) pensions and income security b) highway construction c) science, space, and technology d) agriculture and rural development
a) pensions and income security
An income tax is progressive if the: a) percentage of income paid as taxes increases as income increases b) tax rate varies inversely with income c) percentage of income paid as taxes is the same regardless of the size of income d) absolute amount paid as taxes varies directly with income
a) percentage of income paid as taxes increases as income increases
In which of the following industry structures is the entry of new firms the most difficult? a) pure monopoly b) oligopoly c) monopolistic competition d) pure competition
a) pure monopoly
Suppose a few powerful firms control all production in an industry and face identical demand and cost schedules. If they successfully collude and maximized joint profits, then price, output, and profit levels in the industry will be the same as those in: a) pure monopoly b) regulated monopoly c) monopolistic competition d) an oligopoly with a kinked demand curve
a) pure monopoly
The money payments made to owners of land, labor, capital and entrepreneurial ability are: a) rent, wages, interest, and profits respectively b) interest, wages, rent, and profits respectively c) rent, wages, dividends, and interest respectively d) rent, profits, wages, and interest respectively
a) rent, wages, interest, and profits respectively
The income and substitution effects account for: a) the downward sloping demand curve b) movements along a given supply curve c) the "other things equal" assumption d) the upward sloping supply curve
a) the downward sloping demand curve
For an imperfectly competitive firm: a) the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold b) total revenue is a straight, upsloping line because a firm's sales are independent of product price c) the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold d) the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold
a) the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold
A natural monopoly exists when: a) unit costs are minimized by having one firm produce an industry's entire output b) several formerly competing producers merge to become the only firm in an industry c) short-run average total cost curves are tangent to long-run average total costs curves d) minimum efficient scale is attained at a small level of output
a) unit costs are minimized by having one firm produce an industry's entire output
What do wages paid to blue-collar workers, interest paid on a bank loan, forgone interest, and the purchase of component of component parts have in common? a) none are either implicit or explicit costs b) all are opportunity costs c) all are implicit costs d) all are explicit costs
b) all are opportunity costs
The budget line shows: a) the amount of product A that a consumer is willing to give up to obtain one more unit of product B b) all possible combinations of two goods that can be purchased, given money income and the prices of the goods c) all equilibrium points on an indifference map d) all possible combinations of two goods that yield the same level of utility to the consumer
b) all possible combinations of two goods that can be purchased, given money income and the prices of the goods
The main determinant of elasticity of supply is the: a) number of close substitutes for the product available to consumers b) amount of time the producer has to adjust inputs in response to a price change c) urgency of consumer wants for the product d) number of uses for the product
b) amount of time the producer has to adjust inputs in response to a price change
The law of diminishing marginal utility states that: a) total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed b) beyond some point additional units of a product will yield less and less extra satisfaction to a consumer c) price must be lowered to induce firms to supply more of a product d) it will take larger and larger amounts of resources beyond some point to produce successive units of a product
b) beyond some point additional units of a product will yield less and less extra satisfaction to a consumer
If for a firm P=minimum ATC=MC, then: a) allocative efficiency is being achieved,but productive efficiency is not b) both allocative efficiency and productive efficiency are being achieved c) neither allocative efficiency nor productive efficiency is being achieved d) productive efficiency is being achieved, but allocative efficiency is not
b) both allocative efficiency and productive efficiency are being achieved
The marginal utility is the: a) sensitivity of consumer purchases of a good to changes in the price of that good b) change in total utility obtained by consuming one more unit of a good c) change of total utility obtained by consuming another unit of a good divided by the change in the price of that good d) total utility associated with the consumption of a certain number of units of a good divided by the number go units consumed
b) change in total utility obtained by consuming one more unit of a good
In which of the following industries are economies of scale exhausted at relatively low levels of output? a) aircraft production b) concrete mixing c) automobile production d) production of electricity
b) concrete mixing
An S corporation is a: a) firm that accepts savings deposits b) form of business organization (reserved for relatively small firms) that avoids double taxation of corporate profit and provides limited liability for the owners c) form of business organization designed to protect firms from lawsuits by disgruntled stockholders d) super-size corporation characterized by 50,000 or more employees
b) form of business organization (reserved for relatively small firms) that avoids double taxation of corporate profit and provides limited liability for the owners
A price floor means that: a) sellers are artificially restricting supply to raise price b) government is imposing a legal price that is above the equilibrium price c) inflation is severe in this particular market d) government is imposing a legal price that is below the equilibrium price
b) government is imposing a legal price that is above the equilibrium price
Which of the following is not a characteristic of the market system? a) freedom of enterprise b) government ownership of the major industries c) competition in product and resource markets d) private property
b) government ownership of the major industries
The production possibilities curve illustrates the basic principle that: a) an economy will automatically obtain full employment of its resources b) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produce c) an economy's capacity to produce increases in proportion to its population size d) the production of more of any one good will in time require smaller and smaller sacrifices of other goods
b) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produce
To economists the main difference between the short run and the long run is that: a) the law of diminishing returns applies in the long run, but not in the short run b) in the long run all resources are variable, while in the short run at least one resource is fixed c) fixed costs are more important to a decision making in the long run than they are in the short run d) in the short run al resources are fixed, while in the long run all resources are variable
b) in the long run all resources are variable, while in the short run at least one resource is fixed
Which of the following is true concerning purely competitive industries? a) there are economic profits in the long run, but not in the short run b) in the short run, firms may incur economic losses or earn economic profits, button the long run they earn normal profits c) there will be economic loses in shelling run because of cut-throat competition d) economic profits will persist in the long run if consumer demand is strong and stable
b) in the short run, firms may incur economic losses or earn economic profits, but on the long run they earn normal profits
When economics say that people act rationally in their self interest, they mean that individuals: a) are mainly creatures of habit b) look for and pursue opportunities to increase their utility. c) are unpredictable d) generally disregard the interests of others
b) look for and pursue opportunities to increases their utility.
Other things equal, the monopsonistic employer will pay a: a) higher wage rate and hire a larger number of workers than will a purely competitive employer b) lower wage rate and hire fewer workers than will a purely competitive employer c) higher wage rate but hire fewer worker than will a purely competitive employer d) lower wage rate but hire a lager number of workers than will a purely competitive employer
b) lower wage rate and hire fewer workers than will a purely competitive employer
The problems of aggregate inflation and unemployment are: a) major topics of microeconomics b) major topics of macroeconomics c) peculiar to command economies d) not relevant to the U.S economy
b) major topics of macroeconomics
To maximize utility a consumer should allocate money income so that the: a) elasticity of demand on all products purchased is the same b) marginal utility obtained from the last dollar spent on each product is the same c) total utility derived from each product consumed is the same d) marginal utility of the last unit of each product consumed is the same
b) marginal utility obtained from the last dollar spent on each product is the same
The economic term for a sole employer in a nonunion community is: a) bilateral monopolist b) monopsonist c) monopolist d) bilateral competitor
b) monopsonist
Under monopolistic competition entry to the industry is: a) completely free of barriers b) more difficult than under pure competition but not nearly as difficult as under pure monopoly c) more difficult than under pure monopoly d) blocked
b) more difficult than under pure competition but not nearly as difficult as under pure monopoly
Supply curves tend to be: a) perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply b) more elastic in the long run because there is time for firms to enter or leave the industry c) perfectly inelastic in the long run because the law of scarcity imposes absolute limits in production d) less elastic in the long run because there is a time fir firms to enter or leave an industry
b) more elastic in the long run because there is time for firms to enter or leave the industry
Diseconomies of scale arise primarily because: a) the short-run average total cost curve rises when marginal production is increasing b) of the difficulties involved in managing and coordinating a large business enterprise c) firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available d) beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital)
b) of the difficulties involved in managing and coordinating a large business enterprise
In which of the following market structures is there a clear-cut mutual interdependence with respect to price-output policies? a) pure monopoly b) oligopoly c) monopolistic competition d) pure competition
b) oligopoly
One major barrier to entry under pure monopoly arises from: a) the availability of close substitutes for a product b) ownership of essential resources c) the price taking ability of the firm d) diseconomies of scale
b) ownership of essential resources
The basic formula for the price elasticity of supply coefficient is: a) absolute decline in quantity demanded/absolute increase in price b) percentage change in quantity supplied/percentage change in price c) absolute decline in price/absolute increase in quantity demanded d) percentage change in price/percentage change in quantity demanded
b) percentage change in quantity supplied/percentage change in price
For economists the word "utility" means: a) rationality b) pleasure and satisfaction c) purposefulness d) versatility and flexibility
b) pleasure and satisfaction
The demand curve shows the relationship between: a) price and production costs b) price and quantity demanded c) consumer tasted and the quantity demanded d) money income and quantity demanded
b) price and quantity demanded
Which of the following is not characteristic of pure competition? a) no barriers to entry b) price strategies by firms c) a larger number of sellers d) a standardized product
b) price strategies by firms
Which would be a characteristic of monopolistic competition? a) a potential for price fixing through collusion b) relatively small market share for each firm c) mutual interdependence among the few firms d) product standardization
b) relatively small market share for each firm
The price elasticity of supply measure how: a) easily labor and capital can be substituted for one another in the production process b) responsive the quantity supplied of X is to changes in the price of X c) responsive the quantity supplied of Y is to changes in the price of X d) responsive quantity supplied is to a change in incomes
b) responsive the quantity supplied of X is to changes in the price of X
With respect to state finance: a) the corporate income tax is the major source of revenue and natural resource development the major type of expenditure b) sales and excise taxes are the major source of revenue and education is the major type of expenditure c) death and gift taxes are the major source of revenue and most expenditures are for hospitals and health services d) property taxes are the basic source of revenue and education is the major type of expenditure
b) sales and excise taxes are the major source of revenue and education is the major type of expenditure
In deciding whether to study for an economics quiz or go to a movie, one is confronted by the ideas of: a) full production b) scarcity and opportunity costs c) money and real capital d) complementary economic goals
b) scarcity and opportunity costs
Total utility may be determined by: a) multiplying the marginal unity of the last unit consumed by the number of units consumed b) summing the marginal utilities of each unit consumed c) multiplying the marginal utility of the last unit consumed by product price d) summing the marginal utility of the first unit consumed and the last unit consumed
b) summing the marginal utilities of each unit consumed
Human capital is best defined as: a) the exchange of money for real assets b) the productive skills and knowledge that workers acquire from education and training c) the substitution of labor for machinery in the production process d) any piece of machinery that must be combined with labor to be productive
b) the productive skills and knowledge that workers acquire from education and training
Price discrimination refers to: a) the difference between the prices a pure;y competitive seller and purely monopolistic seller would charge b) the selling of a given product at different prices that do not reflect cost differences c) selling a given product at different prices at two different points in time d) any price above that which equal to a minimum average total cost
b) the selling of a given product at different prices that do not reflect cost differences
Which of the following is a positive statement? a) it is too hoot to jog today b) the temperature is 92 degrees today c) I enjoy summer evenings when it cools off d) the humidity is too high today
b) the temperature is 92 degrees today
The theory of consumer behavior assumes that consumers attempt to maximize: a) the difference between total and marginal utility b) total utility c) average utility d) marginal utility
b) total utility
If the production of a good or service creates sizable spillover benefits, government might correct for the: a) overallocation of resources to its production by granting a subsidy b) under allocation of resources to its production by granting a subsidy c) under allocation of resources to its production by imposing an excise tax d) overallocation of resources to its production by imposing an excise tax
b) under allocation of resources to its production by granting a subsidy
A purely competitive firm's short-run supply curve is: a) upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve b) upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve c) upsloping only when the industry has constant costs d) perfectly elastic a the minimum average total cost
b) upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve
Which of the following is one of the Five Fundamental Questions? a) how much should the society save? b) what goods and services will be produced? c) Who should appoint the head of the central bank? d) which products will be in scarce supply and which in excess supply?
b) what goods and services will be produced?
The kinked-demand curve model of oligopoly is useful in explaining: a) the process by which oligopolistic merge with one another b) why oligopolistic prices might change only infrequently c) the way that collusion works d) why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost
b) why oligopolistic prices might change only infrequently
Economies and diseconomies of scale explain: a) the profit-maximizing level of production b) why the firm's long run average cost curve is U-shaped c) why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point d) the distinction between fixed and variable costs
b) why the firm's long run average cost curve is U-shaped
The term oligopoly indicates: a) a one-firm industry b) many producers of a differentiated product c) a few firms producing either a differentiated or a homogenous product d) an industry whose four-firm concentration ratio is low
c) a few firms producing either a differentiated or a homogenous product
If there are significant economies of scale in an industry, then: a) firms must differentiate their products to earn economic profits b) entry to that industry will be easy c) a firm that is large may be able to produce at a lower unit cost than can a small firm d) a firm that is large will have to charge a higher price than will a small firm
c) a firm that is large may be able to produce at a lower unit cost than can a small firm
Which of the following is correct? a) both purely competitive and monopolistic firms are "price takers" b) both purely and monopolistic firms are "price makers" c) a purely competitive firm is a "price taker", while a monopolist is a "price maker" d) a purely competitive firm is a "price maker", while a monopolist is a "price taker"
c) a purely competitive firm is a "price taker", while a monopolist is a "price maker"
Pure monopoly means: a) any market in which the demand curve to the firm is downsloping b)a standardized product being produced by many firms c) a single firm producing a product for which there is no close substitutes d) a large number of firms producing a differentiated product
c) a single firm producing a product for which there is no close substitutes
A surplus of a product will arise when price is: a) below equilibrium with the result that quantity supplied exceeds quantity demanded b) above equilibrium with the result that quantity demanded exceeds quantity supplied c) above equilibrium with the result that quantity supplied exceeds quantity demanded d) below equilibrium with the result that quantity demanded exceeds quantity supplied
c) above equilibrium with the result that quantity supplied exceeds quantity demanded
Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that: a) economists can conduct controlled laboratory experiments b) one cannot generalize about the relationship between the rice of bananas and the quantity purchased c) all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant d) the quantity of bananas purchased determines the price of bananas
c) all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant
When the percentage change in price is greater than the resulting percentage change in quantity demanded (hint: first calculate elasticity then consider TR rule): a) a decrease in price will increase total revenue b) demand may be either elastic or inelastic c) an increase in price will increase total revenue d) demand is relatively elastic
c) an increase in price will increase total revenue
Which of the following best expresses the law of diminishing returns? a) because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output b) population growth automatically adjusts to that at which the average product per worker will be at a maximum c) as successive amounts of one resource (labor) are added to fixed amounts of other resources (property), beyond some point the resulting extra output will decline. d) proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output
c) as successive amounts of one resource (labor) are added to fixed amounts of other resources (property), beyond some point the resulting extra output will decline.
The demand curve in a purely competitive industry is __________, while demand curve to a single firm in that industry is _____________. a) downsloping, perfectly inelastic b) perfectly elastic, downsloping c) downsloping, perfectly elastic d) perfectly inelastic, perfectly elastic
c) downsloping, perfectly elastic
Mutual interdependence means that: a) product differentiation exists, that is, firms produce close substitutes, but not identical products b) each seller faces a completely inelastic demand curve c) each firm must consider the possible reactions of rivals when establishing price policy d) when a pure monopolist chooses a price, it also necessarily chooses some specific level of output
c) each firm must consider the possible reactions of rivals when establishing price policy
The electricians union is a good example of: a) countervailing power b) inclusive unionism c) exclusive unionism d) how unions can simultaneously increase wage rates and employment by increasing the demand for labor
c) exclusive unionism
The market system's answer to the fundamental question " what will be produced?" is essentially: a) low cost goods and services b) goods and services that possess lasting value c) goods and services that are profitable d) goods and service that can be produced using round-about production
c) goods and services that are profitable
The primary copper industry in the United States would be an example of a: a) duopoly b) noncollusive oligopoly c) homogenous oligopoly d) differentiated oligopoly
c) homogenous oligopoly
Which of the following statements is correct? a) if supply declines and demand remains constant, equilibrium price will fall b) if demand increases and supply decreases, equilibrium price will fall c) If supply increases and demand decreases, equilibrium price will fall d) if demand decreases and supply increases, equilibrium price will rise
c) if supply increases and demand decreases, equilibrium price will fall.
The French term "laissez-faire" means: a) circular flow b) public ownership c) let it be d) there is no free lunch
c) let it be
Monopolistic competition means: a) a market situation where competition is based entirely on product differentiation and advertising b) a large number of firms producing a standardized or homogenous product c) many firms producing differentiated products d) a few firms producing a standardized or homogeneous product
c) many firms producing differentiated products
Other things equal, if the prices of a firm's variable inputs were to fall: a) one could not predict how unit costs of production would be affected b) marginal cost, average variable cost and average fixed cost would all fall c) marginal cost, average variable cost, and average total cost would all fall d) average variable cost would fall, but marginal costs would be unchanged
c) marginal cost, average variable cost, and average total cost would all fall
When a monopolistically competitive firm is long run equilibrium: a) normal profit is zero and price equals marginal cost' b) economic profit is zero and price equals marginal costs c) marginal revenue equals marginal cost and price equals average total cost d) production takes place where ATC is minimized
c) marginal revenue equals marginal cost and price equals average total cost
Monopolistic competition and oligopoly are alike in that: a) strong mutual interdependence exists among firms in both market models b) the number of firms is approximately the same in both cases c) non price competition is common to both d) the kinked-demand analysis is applicable in both instances
c) non price competition is common to both
An industry comprised of four firms, each with about 25% of the total market for a product is an example of: a) pure competition b) monopolistic competition c) oligopoly d) pure monopoly
c) oligopoly
The formula for cross elasticity of demand is percentage change in: a) percentage change in quantity demanded of X/ percentage change in price of X b) percentage change in quantity demanded of X/ percentage change in income c) percentage change in quantity demanded of X/percentage change in price of Y d) percentage change in price of X/percentage change in quantity demanded of Y
c) percentage change in quantity demanded of X/percentage change in price of Y
Marginal utility can be: a) positive, but not negative b) positive or negative, but not zero c) positive, negative, or zero d) decreasing, bt not negative
c) positive, negative, or zero
Other things equal, if the price of a key resource used to produce product X falls, the : a) product demand curve of X will shift to the right b) product supply curve of X will shift to the left c) product supply curve of X will shift to the right d) product demand curve of X will shift to the right
c) product supply curve of X will shift to the right
The location of the product supply curve depends on: a) the number of buyers in the market b) the location of the demand curve c) production technology d) the tastes of buyers
c) production technology
Which of the following is most likely to be a fixed cost? a) shipping charges b) wages for unskilled labor c) property insurance premiums d) expenditures for raw materials
c) property insurance premiums
The demands for such products as salt, bread, and electricity tend to be: a) perfectly price elastic b) of unit price elasticity c) relatively price inelastic d) relatively price elastic
c) relatively price inelastic
A craft union attempts to increase wage rates by: a) shifting the labor supply curve to the right b) shifting the MRP curve to the right c) shifting the labor supply to the left d) equating the MRP and the MRC curves
c) shifting the labor supply to the left
Listed in descending order of total numbers, the business population is comprised of: a) corporations, partnerships, and sole proprietorships b) partnerships, corporations, and sole proprietorships c) sole proprietorship, corporations, and partnerships d) sole proprietorship, partnerships, and corporations
c) sole proprietorship, corporations, and partnerships
Use your basic knowledge and your understanding of market structures to answers this question. Which of the following companies most closely approximate a monopolistic competitor? a) microsoft b) ford motor company c) subway sandwiches d) pittsburgh plate glass
c) subway sandwiches
The price of elasticity of demand: a) is infinitely large for a perfectly inelastic demand curve b) tends to be inelastic in high-price ranges and elastic in low-price ranges c) tends to be elastic in high-price ranges and inelastic in low-price ranges d) is the same at each price-quantity combination on a stable demand curve
c) tends to be elastic in high-price ranges and inelastic in low-price ranges
Some agricultural sub-Saharan nations of Africa have over farmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggest that: a) these nations are operating at some point outside of their production possibilities curves b) the concavity of the production possibilities curves of such nations has increased c) the production possibilities curves of such nations have shifted inward d) the production possibilities curves of such nations have shifted outward
c) the production possibilities curves of such nations have shifted inward
At each point on an indifference curve: a) money income is the same b) the prices of the two products are the same c) total utility is the same d) marginal utility is the same
c) total utility is the same
Which of the following is not a barrier to entry? a) economies of scale b) patents c) ownership of essential resources d) X-inefficiency
d) X-inefficiency
Bilateral monopoly occurs where: a) a monopsonistic employer bargains with an exclusive union b) a craft union bargains with a purely competitive employer c) an industrial union bargains with a purely competitive employer d) a monopsonistic employer bargains with an inclusive union
d) a monopsonistic employer bargains with an inclusive union
Non price competition refers to: a) reductions in production costs that are not reflected in price reductions b) competition between products of different industries, e.g, competition between aluminum and steel in the manufacturer of automobile parts c) price increases by a firm that are ignored by its rivals d) advertising, product promotion, and changes in the real or perceived characteristics of a product
d) advertising, product promotion, and changes in the real or perceived characteristics of a product
OPEC provides an example of: a) noncollusive oligopoly b) a monopolistically competitive industry c) a tacit understanding d) an international cartel
d) an international cartel
Economics theories: a) that are true for individual economic units are never true for the economy as a whole. b) are abstractions and therefore of no application to real situations c) are useless because they are not based on laboratory experimentation d) are generalizations based on a careful observation of facts
d) are generalizations based on a careful observation of facts
The most efficient combination of resources in producing any output is the combination that: a) uses the smallest total quantity of all resources b) comes closest to using the same quantities of land, labor, capital, and entrepreneurial ability. c) conserves most on the use of labor d) can be obtained for the smallest money outlay
d) can be obtained for the smallest money outlay
Black markets are associated with: a) ceiling prices and the resulting product surpluses b) price floors and the resulting product surpluses c) price floors and the resulting product shortages d) ceiling prices and the resulting product shortages
d) ceiling prices and the resulting product shortages
An indifference map implies that: a) money income is constant, but the prices the two products vary directly with the quantities purchased b) the two products under consideration are perfectly substitutable for one another c) a consumer is better off to be at some point high on a given curve as opposed to a point low on the same curve d) curves farther from the origin yield higher levels of total utility
d) curves farther from the origin yield higher levels of total utility
Newspaper dispensing devices seemingly "trust" people to take only a single paper but the devices actually rely on the law of: a) supply b) increasing opportunity costs c) demand d) diminishing marginal utility
d) diminishing marginal utility
The relationship between quantity supplied and price is ________ and the relationship between quantity demanded and price is ____________. a) inverse, direct b) inverse, inverse c) direct, direct d) direct, inverse
d) direct, inverse
The addition of government to the circular-flow model illustrates that government: a) provides services to businesses and households b) purchases goods in the product market c) purchases resources in the resource market d) does all of the above
d) does all of the above
A monopoly is most likely to emerge and be sustained when: a) output demand is relatively elastic b) firms have U-shaped, average-total-cost curve c) fixed capital costs are small relative to total costs d) economies of scale are large relative to market demand
d) economies of scale are large relative to market demand
The four-firm sales concentration ratio for an industry measures the: a) degree of X-inefficiency in the industry b) percentage of the industry's capital facilities owned by the four largest firms c) geographic concentration of firms d) extent to which the four largest firms dominate the production of a good
d) extent to which the four largest firms dominate the production of a good
Inclusive unionism is practiced mostly by: a) craft unions b) professional and semiprofessional employees c) small unions comprised of skilled workers, such as bricklayers d) industrial unions
d) industrial unions
The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of: a) overt collusion b) covert collusion c) import competition d) interindustry competition
d) interindustry competition
The four factors of production are : a) labor, capital, technology, and entrepreneurial ability b) land, labor, capital, and money c) labor, capital, entrepreneurial ability, and money d) land, labor, capital, and entrepreneurial ability
d) land, labor, capital, and entrepreneurial ability
A caller to a radio talk show states that protesters against globalization are a collection of " anarchist punks, naïve college students, and trade union radicals." This is an example of : a) the economic perspective b) marginal analysis c) the fallacy of composition d) loaded terminology
d) loaded terminology
In the long run a pure monopolist will maximize profits by producing that output at which marginal cost: a) average cost b) average variable cost c) average total cost d) marginal revenue
d) marginal revenue
Product variety is likely to be greater in: a) homogenous oligopoly than in monopolistic competition b) homogenous oligopoly than in differentiated oligopoly c) pure competition than in monopolistic competition d) monopolistic competition than in pure competition
d) monopolistic competition than in pure competition
The steel and automobile industries would be examples of which market model? a) monopolistic competition b) pure competition c) pure monopoly d) oligopoly
d) oligopoly
The term "ceteris paribus" means: a) prosperity inevitably follows recession b) that if event A precedes event B, A has caused B c) that economics deals with facts, not values d) other things equal
d) other things equal
A firm finds that at its MR=MC output, its TC=$1,500, TVC= $1,000, TFC=$500,and total revenue is $1,200. This firm should: a) shut down in the short run b) produce because it will realize an economic profit c) liquidate its assets and go out of business d) produce because the resulting loss is less than its TFC
d) produce because the resulting loss is less than its TFC
Which is not a firm of product differentiation for the monopolistically competitive firm? a) brand names and trademarks b) promotion and packaging c) location and accessibility d) standard hours and procedures
d) standard hours and procedures
Which of the following is a microeconomics statement? a) the general price level increased by 4% last year b) the real domestic output increased by 2.5 % last year c) unemployment was 6.8% of the labor force last year d) the price of personal computers declined last year
d) the price of personal computers declined last year
The MR=MC rule applies: a) only when the firm is a "price taker" b) only to monopolies c) only to purely competitive firms d) to firms in all types of industries
d) to firms in all types of industries
Average revenue is: a) total revenue minus total cost b) marginal revenue minus marginal cost c) marginal revenue divided by the quantity of output d) total revenue divided by the quantity of output
d) total revenue divided by the quantity of output
If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: a) will be less than $5 b) may be either greater or less than $5 c) will be greater than $5 d) will also be $5
d) will also be $5
