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economics final

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economics is most importantly concerned with?
studying how we allocate scarce resources to satisfy unlimited wants
economic choices or tradeoffs are the result of?
scarcity
economics is concerned with
all of the answers are correct
economic resources are also known as?
factors of production
which of the following is not an example of a resource?
all of the answers are resources
human capital is?
the expertise or knowledge possessed by workers
which of the following is true?
poverty could be eliminated but scarcity could not
which of the following is true of resources?
they are the inputs used to produce goods and services
an example of a capital resource is?
a dump truck
entrepreneurship is
the resource that organizes the other factors of production in order to produce goods and or services
which of the following is an example of an individual motivated be self-interest?
all answers are correct
economists believe that individuals act as if they are motivated by self-interest and..
respond in predictable ways to changing circumstances
from an economists perspective which of the following observations is not true
self-interest is purely monetary in nature
when economists refer to economic behavior, they mean that?
rational people try to anticipate the likely consequences of their actions
what according to an economist, forms the basis of rational human behavior under current and anticipated circumstances
values and information
"as a rational person, you would expect individuals to always avoid actions that are illegal"
This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.
when economists speak of markets, they primarily mean
mechanisms that coordinate actions of buyers and sellers.
which of the following serve as the language of the market system
Market prices
which of the following is an example of a market failure
all the examples are market failures
market failure occurs when
the economy fails to allocate resources efficiently on its own
a hypothesis is
a testable proposition
a theory can best be defined as
a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work
the importance of the ceteris paribus assumption is that it
allows one to analyze the relationship between two variables apart from the influences of other variables
economics is different from a "hard" science like physics because
economists cannot easily control all the variables that might influence human behavior
macroeconomis topics do not usually include
the profit maximizing decisions of an individual manufacturer
which of the following lies primarily within the realm of microeconomics
a study of supply and demand conditions in the market for orange juice
which of the following best illustrates the fallacy of composition
if ms. spann had more money, she could buy more scarce goods; if the nation had more money,everyone could buy more scarce goods
which of the following is a statement of positive economics
the income tax reduces after-tax incomes of the rich
Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?
Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.
Which of the following is not an example of the use of the problem solving perspective provided by economics?
The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.
because of scarcity
we must sacrifice valuable alternatives to obtain more goods and services we desire
Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour.
the opportunity cost of an item is
the highest valued alternative you give up to get that item
the opportunity cost of going to college includes
both tuition and the value of the students time
opportunity cost includes
both monetary and non-monetary costs
economists believe that in regards to criminal behavior
those choosing to commit criminal acts weigh the expected marginal benefits rather than the expected marginal costs
Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:
in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.
which of the following best defines rational behavior
undertaking activities whenever the marginal benefit exceeds the marginal cost
if people are self-interested
as their preferences for leisure time increases, they are likely to work less. as the wages they are offered increases, they are likely to work more
Pollution damages the environment we live in. An economist would advise that we reduce air pollution:
as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.
specialization is a way for
individuals to make the best use of resources by devoting themselves to one primary productive activity
Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n)
comparative advantage in production.
Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?
The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.
A nation has a comparative advantage in the production of cars over another nation if:
it can produce cars at a lower opportunity cost than the other country.
Mike is able to complete a tax return in two hours earning a fee of $100. As an alternative, he could pitch in at a volunteer car wash washing four cars in one hour. His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour. Both individuals could benefit if
Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed.
Which of the following is true?
A. People specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result.

B. The primary reason people pursue their comparative advantage is their self-interest.

C. One advantage of specialization is that workers acquire greater skill from repetition.

D. If a person, a region, or a country can produce a good or service at a lower opportunity cost than others, we say that they have a comparative advantage in the production of that good or service.

E. All of the above are true.
Which of the following is true?
A. Voluntary trades give both parties more in value than what they give up.

B. Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage.

C. People can gain by specializing in the production of the good in which they have a comparative advantage.

D. Voluntary trade directly increases wealth by making both parties better off, and it is the prospect of wealth-increasing exchange that leads to productive specialization.

E. All of the above are true.
Which of the following is not true?
What one trader gains from a trade, the other must lose.
advantages of specialization do not include
reduced interdependence
Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. According to comparative advantage,
tom should kill more birds and fish less, then trade birds for fish
which of the following is true of a competitive market
buyer and sellers have little market power
the law of demand refers to
inverse relationship between the price of a good and the quantity demanded
in economics, the demand for a good refers to the amount of the good people
will buy at various prices
the demand schedule for a good
indicates the quantities that will be purchased at alternative market prices
the price of music downloads decreases, which of the following is most likely to happen
quantity demanded will increase
if the price of tennis rackets were to increase, we would expect
the demand for tennis balls to decrease
which of the following is most likely to be an inferior good
used clothing
a decrease in consumer incomes will
A. decrease the demand for an inferior good.

B. decrease the supply of an inferior good.

C. increase the demand for a normal good.

D. increase the supply of a normal good.

E. do none of the above.
Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be:
complements
A change in which of the following variables does not cause a change in demand?
prices of unrelated goods
the supply curve shows
how the quantity produced varies with price
an upward sloping supply curve shows that
suppliers are willing to increase production of their goods if they receive higher prices for them
a supply schedule shows
how many units producers are willing and able to sell at various prices
each point on the supply curve shows
quantity supplied at that price
the market supply schedule reflects the total quantity
supplied at each price by all of the producers
which of the following would NOT cause a change in the supply of milk?
an increase in the price of milk
to an economists, a decrease in supply means a
A. rightward shift of the supply curve.

B. movement up along a supply curve.

C. downward shift of the supply curve.

D. movement down along the supply curve.

E. none of the above
The difference between a change in quantity supplied and a change in supply is that a change in:
quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
Which of the following would be most likely to cause a reduction in the supply of Nintendo video games?
an increase in the price of computer chips used to make Nintendo games
Which of the following would not shift the supply curve for swordfish?
an increase in the price of swordfish
If there is a surplus, ____ will be frustrated by their inability to exchange at the current price, and they will compete the prices ____ as a result.
sellers; down.
Ceteris paribus, if the vacancy rate in an apartment complex increased from 5% to 20% over the past two years, we would expect to see
the price decrease leading to an increase in quantity demanded.
Which of the following is the correct way to describe equilibrium in a market?
At equilibrium, quantity demanded equals quantity supplied.
At the equilibrium price for gasoline:
both a. and d. are correct.
When there is an excess quantity supplied of a product at the current price, then:
both c. and d. will occur.
Interpret the following statement: "Demand exceeds the available quantity of apartment housing. If the price of apartment rentals were increased, demand would decrease and an equilibrium could be achieved."
The statement is incorrect because it confuses "demand" with "quantity demanded."
When there is an excess quantity demanded of a product at the current price, then:
the price will tend to rise.
Which of the following would increase the quantity of LCD TVs demanded but would not increase the demand for LCD TVs?
a decrease in the current price of LCD TVs
Assume that coffee and tea are substitutes for each other. If weather conditions cause a substantial portion of the available coffee crop to be destroyed, then most probably:
the demand for tea will increase.
A shortage currently exists in the market for strawberries. Which of the following statements is correct?
The quantity of strawberries demanded exceeds the quantity supplied and the market price is below the equilibrium price.
price elasticity of demand is defines as
the percentage change in quantity demanded divided by the percentage change in price
Demand is said to be ____ when the quantity demanded is very responsive to changes in price.
elastic
A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:
elastic
Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?
0.33
Which of the following is false?
A. The price elasticity of demand measures the responsiveness of quantity demanded to a change in price.

B. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

C. If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change.

D. If demand is inelastic, it means the quantity demanded changes by a relatively smaller amount than the price change.

E. All of the above are true
If the price elasticity of demand was 4.0 (in absolute terms), a 10% off sale would lead to:
a 40% increase in purchases by customers.
The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes more than doubles. The demand for shoes from The Shoe Emporium appears to be:
. elastic.
If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?
quantity demanded will remain the same
which of the following would most likely feature elastic demand
fresh green beans
Elasticity of demand will ____ as the availability of substitutes ____.
Both c. and d. are correct answers.
If the elasticity of demand for bangles is equal to 1, moving along the demand curve for bangles, an increase in price will:
increase the quantity demanded and leave total revenue unchanged.
A price cut will increase the total revenue a firm receives if the demand for its product is:
elastic
The Book Nook reduces prices by 20%. If the dollar value of The Book Nook's sales remain constant, it indicates that:
the quantity of books sold increases by 20%
A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears that:
demand is elastic and total revenue will increase
If the elasticity of supply of a good was 2, how much would the price have to increase to lead to an increase in output of 6 percent?
3%
If the elasticity of supply of bangles is equal to 1, moving along the supply curve for bangles, an increase in price will:
increases the quantity supplied and increases total revenue
The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.
percentage, percentage
if the supply curve for a product is vertical, then the elasticity of supply is
equal to zero
a perfectly elastic supply curve is
horizontal
the longer the time period considered, the elasticity of supply tends to
increase
a surplus will result whenever the
government imposes a price floor above the equilibrium price
Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases:
the quantity of lettuce supplied will increase
the imposition of a price ceiling on a market often results in
a shortage
Which of the below is true?
Both price floors and price ceilings generally reduce the quantity exchanged in the market.
Which of the following is an example of an unintended consequence?
a price ceiling on gasoline that causes a gas shortage
If the demand for apples is highly elastic and the supply is highly inelastic, then if a tax is imposed on apples it will be paid:
largely by the sellers of apples
Consumer surplus is:
the difference between what consumers are willing to pay and what they are required to pay for a good.
Graphically, consumer surplus is measured by:
the area below the demand curve, but above the market price.
Which of the following best explains the source of consumer surplus for Good A?
Many consumers would be willing to pay more than the market price for some units of Good A.
ceteris paribus, an increase in the price of a good will cause the
consumer surplus derived from the good to decrease
ethics
can be defined in any of the above ways
in free market economics
most market exchanges will result in all parties "winning."
A market economy without any ethics would have:
no value
Effective free market ethical systems must provide for all of the following EXCEPT:
a clearly defined moral foundation
Cost-benefit analysis can determine the optimal amount of all the following EXCEPT
fairness of rules
More efficient positive market ethics will generally help improve all of the following challenges EXCEPT:
moral externalities of a market
In order for a market's ethics to be effective, all of the following must occur, EXCEPT
everyone must agree to take part in the market
Ethical rules based on morals or concepts of fairness are called
normative ethics
If we know someone pays all their taxes and gives money to charity, we know that
only that they pay their taxes and give money to charity
Which of the following does not specify positive ethical rules?
websters dictionary
which of the following statements is TRUE
The U.S. government defines and enforces business ethics in order to protect the economy.
In free markets which allows a high level of unethical corruption:
suppliers will be forced to be corrupt or to leave the market
Ethics violators like embezzlers, frauds, tax cheats and bank robbers
A. usually follow most rules and other ethics most of the time.

B. not only injure individuals and companies, but also often hurt entire markets.

C. often use rational cost-benefit analysis when deciding whether to cheat.

D. may feel so ashamed and guilty of their crimes that they are driven to suicide.

E. All of the above may be true of ethics violators.
which of the following would break a positive ethic
driving two miles per hour over the speed limit
Which of these conditions are most likely to motivate honest people to become corrupt?
seeing your boss and fellow workers get rich by lying and cheating
plagiarism is unethical because
A. plagiarism might result in stealing profits from the original writer

B. plagiarism can decrease the value of honest students' diplomas

C. plagiarism can make it more difficult for instructors to assess the quality of students' writings

D. plagiarism is a type of fraud

E. all of the above are reasons
Which of the following are NOT very important to maintaining effective market ethics?
whether people understand the reasons for the rules or regulations
which of the following people are more likely to break ethical rules
someone who is ignorant
Which of the following are reasons why most owners of companies want their employees to act ethically?
A. Because they care about the well-being of their customers

B. To enhance productivity

C. To maximize public good will toward the company

D. To avoid large fines and expensive lawsuits

E. All the above are reasons why.
A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer:
A. decrease in market demand.

B. decrease in market supply.

C. decrease in equilibrium price.

D. total market collapse.

E. all of the above.
An externality occurs when:
people other than those making the demand and supply decisions share the benefits or the costs of an activity.
Costs that accrue to the total population are called ____ costs. Costs incurred by the producer or consumer who makes the decision are called ____ costs.
social, private
If a negative externality results from the refining of oil, the cost of production as seen by the oil refinery:
does not include the external cost
which of the following statements is true
externalities can never refer to costs borne by the seller
If Don paints the outside of his house a horrendous color:
he probably has lowered the value of his home and the value of his neighbors' homeshe is unlikely to bear all the social costs of his actions.
If there are significant external costs associated with the production of a product, it can be said that the private cost of production to the firm ____ the cost to society associated with this product and output should ____ to move toward the efficient situation.
understates; decreases
If a positive externality results from the consumption of higher education, then the marginal benefit students receive from education:
is less than the marginal social benefit
If a good that features a positive externality is produced in an unregulated free market, the good will be:
under-produced and under-priced
to internalize a positive externality
the consumers of a good could receive a subsidy equal to the external benefit resulting from the production or consumption of the good.
If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:
offer a subsidy for production of the good in order to increase production.
which of the following is an example of a public good
clean air
As an additional consumer obtains the benefits of a public good such as national defense, the benefits to existing consumers:
do not change
Which of the following is true?
It is extremely difficult to limit the benefits of a public good to the people who pay for it.
public goods are those that are consumed
by the paying and nonpaying public alike
Public goods are characterized by:
nonrivalry in consumption. nonexcludability of nonpayers
Without government intervention, society is likely to get too little production of:
both private goods that generate external benefits and public goods
the determination of which goods are public depends on
whether it is possible to exclude additional users from consuming the good if they do not pay for it.
Which of the following is true?
A. The government may be able to overcome the free rider problem with public goods by providing the public goods and imposing taxes to pay for them.

B. The nature of public goods is such that the government cannot accurately assess the benefits and costs of those affected.

C. National defense and flood control are illustrations of public goods.

D. Just as in the case of external benefits, public goods tend to be underprovided by the private sector.

E. All of the above are true.
in a competitive economy with no government sector
there will be too few public goods produced
The free rider problem suggests that competitive markets will tend to:
produce less than the optimal quantity of a public good
The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as:
the lemon problem
sellers may choose not to sell in certain markets because
buyers are unable to accurately perceive the quality of their goods and are, therefore, less willing to pay an appropriate price for them.
Which of the following is most likely to be an example of asymmetric information?
a collectible baseball card purchased on eBay
If a company offers a medical and dental care plan that offers benefits to all of the members of each employee's family for a given monthly premium, an employee who is a mother of five children and who has bad teeth who elects that plan would be an illustration of:
the adverse selection problem
which of the following is true
Reducing information costs to consumers and suppliers could permit more intelligent market decisions and lead to greater satisfaction.
a warranty offered by a seller is one way to overcome
an adverse selection problem
the tendency of those who are insured to take more risks is a problem of
moral hazard
The U.S. government establishing a policy that it will bail out troubled financial institutions and a resulting increase in the number of bank failures is an example of:
the moral hazard problem
Which of the following statements best summarizes the essence of public choice analysis?
Public choice analysis applies economic principles to political science issues.
The view that those whose preferences represent the middle position on an issue will tend to determine the outcome of an election is called:
the median voter model
an explicit cost is
an opportunity cost. an out of pocket expense
an implicit cost
is characterized by an opportunity cost and does not require an outlay of money
A firm which owns its own equipment and is earning positive economic profits
is probably earning positive accounting profits
economic profits will exist
economic profits are not sure to exist in any of the above cases
When economic profits in an industry are zero and implicit costs are positive:
accounting profits will be greater than zero. resources will not tend to either enter or leave the industry, other things equal
economic profits will take into account
both implicit and explicit costs.
economic profits are
less than accounting profits if implicit costs are greater than zero
when a firm makes zero economic profit, it means that
the firm is covering he total opportunity costs of its resources
an economic profit of zero implies
A. normal profit.

B. the firm is covering both explicit and implicit costs.

C. the firm's revenues are sufficient to compensate the money and time that the owners put into the business.

D. all of the above
which of the following observations is true
sunk costs are irrelevant for any future actions
Don Keene promotes boxing matches. He makes $6,500 per fight. Which cost is most relevant to a decision as to whether to promote one more fight?
the marginal cost of promoting all boxing matches during the year
fixed costs are best defined as
costs that do not vary with output
the marginal cost of good is
the addition to total cost from producing one more unit of output
which of the following is most likely to be a fixed cost for a business
. interest payments on a loan used to finance the construction of a building
the sum of AVC and AFC equals
average total cost
Assuming fixed costs are positive, over a range of output in which average total costs were constant,
average variable cost would be rising as output increases
total variable cost
increases as production increases
when economics of scale exist, a decrease in the level of output will lead to
an increase in cost per unit
when economies of scale exist
per unit production costs decline as output expands
constant returns to scale indicate that a firm is experiencing
per unit costs of production that remain stable as the scale of output expands.
a perfectly competitive firm is a
price taker
which of the following best resembles a perfectly competitive market
the stock market
which of the following is a characteristic of perfect competition
homogeneous products
perfect competition is the term used to describe
an industry in which numerous price-taking firms produce identical products.
the perfectly competitive model assumes that
firms can enter and exit the industry with relative ease
which of the following is true about perfect competition
A. Since a perfectly competitive seller can sell all he wants at the market price, her demand curve is horizontal at the market price over the entire range of output that she could possibly produce.

B. Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market.

C. Because consumers believe that all firms in a perfectly competitive market sell identical (homogeneous) products, the products of all the firms are perfect substitutes.

D. Perfectly competitive markets have easy entry and exit.

E. All of the above are true about perfect competition.
which of the following is true of perfectly competitive firms
none of the above
a perfectly competitive firm faces a demand curve that is
horizontal and perfectly elastic
a competitive firm facing a perfectly elastic demand curve can
sell all of its output at the market price
a perfectly competitive firm has no influence over price because
its output is insignificant relative to the market as a whole
a firm facing a horizontal demand curve
is characterized by all of the above
in a perfectly competitive industry, influence over price is exerted by
the forced of supply and demand
which of the following is false of perfectly competitive firms
Because perfectly competitive firms are price takers, each firm's demand curve remains unchanged even when the market price changes.
The horizontal demand curve facing an individual firm in a perfectly competitive market:
is a reflection of the firm's small size relative to the total market.
If the market demand curve in a perfectly competitive industry shifts right, the demand curve for each existing firm will:
shift up
A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that:
maximizes the amount by which total revenue exceeds total cost
for a perfectly competitive firm, which of the following is always true
p=mr=d
A firm sells grapefruit in a perfectly competitive market at a price of $1.50 per pound. The firm's marginal revenue:
equals $1.50
for a perfectly competitive firm, average revenue is
equal to marginal revenue at all levels of output. equal to price at all levels of output
f a perfectly competitive firm's marginal revenue was less than its marginal cost,
it would contract its output (but not raise its price) in order to increase its profits.
If a perfectly competitive firm is operating in the short run and seeks to maximize profit, the firm should:
increase output whenever market price exceeds marginal cost
In perfect competition, at the firm's profit maximizing short run output, which of the following is true?
all the above
Assume a perfectly competitive firm sells its output for $250 per unit. At its current 2,000 units of output, marginal cost is $180 and increasing, and average variable cost is $160. Assuming it wants to maximize its profits, it should:
increase output
If a profit-maximizing firm finds that price exceeds average variable cost and marginal cost is greater than marginal revenue, it should:
reduce output, but continue producing in the short run
A price-taking firm will tend to expand its output as long as price exceeds average variable cost and:
its marginal cost is less than the market price
Firms will continue to enter a competitive industry until:
any economic profits have been competed away
If new entry occurs in a perfectly competitive industry, the demand curve for each existing firm will:
shift down
If perfectly competitive industry B is currently realizing economic profits, we would expect that:
industry output will rise, good B will fall in price, and economic profits will tend to disappear.
When perfectly competitive firms in an industry are earning positive economic profits,
we would expect entry into the industry.
If a perfectly competitive industry is neither expanding nor contracting, we would typically expect that:
economic profits to be zero the price of the good will be stable
If the long-run industry supply curve in a perfectly competitive market slopes upward, then very likely input prices will ____ as industry output expands.
increases
If input costs remain the same as industry output expands, what would you expect to be the long-run impact of an increase in demand on an industry currently in long-run equilibrium?
there will be more firms but the price will remain the same
extractive industries such as farming mining or lumbering typically
are considered to be increasing cost industries
If your company is in the range of output where it experiences economies of scale, you know:
a 5 percent increase in all inputs will increase output by more than 5 percent.
Which of the following is true about the long run operations of perfectly competitive firms?
all the above
monopoly is at the other end of the spectrum from
perfect competition
a monopolist firm is a
price maker that faces the market demand curve
In a perfectly competitive industry, the industry demand curve is ____, while in a monopolistic industry, the industry demand curve is:
downward sloping; downward sloping
barriers that prevent the entry of new firms may arise because
economies of scale exist over a substantial range of industry demand.the government protects some firms from competition.
pure monopoly
is characterized by all the above
which of the following is a characteristic of a monopoly
larger barriers to entry
a key element to preserving a monopoly is
keeping potential rivals out of the market
Why does the government allow some markets to be monopolized by granting patents?
to promote technological progress
which of the following would likely be an example of a monopolistic industry
none of the above
If there are economies of scale throughout the relevant output range of production, which is false?
It would typically result from a firm's possession of an exclusive patent
A natural gas monopoly currently sells 100 cubic feet of gas at $1.10 per cubic foot. To sell one more cubic foot, the natural gas company must lower the price of gas to $1.09. Which of the following best describes the marginal revenue of the 101st cubic foot of natural gas?
the marginal revenue is less than $1.09
A monopolist can sell 6 units per day at $8 per unit, or 7 units per day at $7 per unit. Its marginal revenue for the seventh unit of output is:
$1
the demand curve facing a monopolist
is less elastic than a perfectly competitive firms demand curve
Graphically which of the following is true for a monopoly?
The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
a monopolist will operate at the quantity where
MR = MC and charge a price corresponding to demand at that level.
Profit-maximizing monopolists choose a level of output such that:
marginal revenue equals marginal cost
For a profit-maximizing monopolist, the price of a product is:
always greater than marginal revenue
Which of the following is true for a monopolist but not for a perfectly competitive firm?
a. and b. are true for a monopolist but not for a perfectly competitive firm.
in the long run, economic profits are
possible for a monopolist but not for a perfectly competitive firm
in both perfect competition and monopoly, a firm
will be characterized by both b. and c.
A monopolist would charge ____ prices and produce ____ output than would exist under perfect competition.
higher; less
which of the following is generally true of monopoly
All of the above are generally true of monopoly.
which of the following is likely in a monopolized market
all of the above
If an unregulated monopolist operates in a market, then:
all the above
the aim of antitrust policy is to
prevent firms from acquiring or exercising undue market power
What was the first important law regulating monopoly that prohibited "restraint of trade"?
sherman act
Which landmark legislation made it illegal to engage in predatory pricing and also prohibited mergers if it led to weakened competition?
clayton act
U.S public utilities are often
regulated natural monopolies
If a regulatory commission wishes to allow a firm to earn a normal rate of return, it should set price equal to:
average total cost
If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return, it should set price which is equal to:
average total cost
Price ____ occurs when producers charge different customers different prices for the same good or service.
discrimination
price discrimination refers to
charging different prices to different groups without a basis for doing so because of differences in production costs.
When a monopolist is able to sell its product at different prices to different customers, it is likely engaging in:
price discrimination
The practice of selling a product to different customers at different prices when marginal cost is the same is known as:
price discrimination
When setting prices, the monopolist may choose to charge alternative customers different prices based on:
all the above
A price-discriminating monopolist will tend to charge a higher price to senior citizens if it believes that senior citizens:
have a greater willingness to pay than other demanders
A monopolist who is able to price discriminate by charging two different groups different prices:
will set prices so that both group's demand curves are elastic at the prices charged.
Ceteris paribus, in which of the following cases would we expect economic profits to be greatest?
an unregulated monopolist who is able to price discriminate.
When a monopolist is able to price-discriminate:
both its profits and output tend to increase.
A monopolist who is unable to price discriminate:
will be characterized by both b. and d.
An industry characterized by only a few firms in the market is called:
an oligopoly
which of the following is characteristic of an oligopolistic industry
all the above
A basic characteristic of the firms in an oligopoly market structure is that they are:
large and interdependent
The key characteristic of oligopoly markets is "interdependence among firms." This means that:
each firm must consider how its decisions will affect its competitors
high barriers to entry are generally found in
both c and d
oligopoly firms
base their pricing and output decisions on the likely responses of rival firms
an example of an oligopoly is
the automobile indusrty
Economists believe that oligopolists like American Airlines and the Kellogg Company:
carefully watch and anticipate the pricing and advertizing moves of their competitors.
Under conditions of oligopoly, economies of large-scale production mean that:
small firms are at a disadvantage in competing with relatively large firms.
In which of the following industry models are the individual firms not price takers?
a and b
a cartel is
a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves.
The Organization of Petroleum Exporting Countries is an example of:
a periodically successful cartel
If the firms in an oligopoly collude, the results will represent what other type of industry?
monopoly
If firms meet together to decide on prices and outputs, it is called:
overt collusion
overt cartels are relatively because
all the above
Which of the following is true for a typical firm in a typical cartel?
"If I alone cheat, I'm better off; if everyone cheats, I'm worse off."
Cartel members have a collective interest in ____ industry output and a private interest in ____ their own output.
decreasing; increasing
____ facilitates joint profit maximization for the oligopoly.
collusion
The maximum possible profit that could be earned by a cartel is:
equal to the monopoly profit
predatory pricing
both c and d
Approximately ____ of national income goes to wages and salaries for labor services.
75 percent
The price of any productive resource is ____ related to ____ the final good or service:
directly; demand for
Which of the following best illustrates the concept of "derived demand"?
An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.
When labor is a firm's only variable input in its production process, a profit-maximizing firm will continue to employ additional workers as long as:
the marginal revenue product of labor > the marginal resource cost.
Which of the following statements are true regarding profit-maximizing firms?
They will attempt to maximize the difference between total revenues and total costs.
Which of the following would cause the demand for carpenters to increase?
an increase in the demand for housing
The relationship between the wage rate and the quantity of labor that employers wish to hire is called:
the market demand curve for labor
If labor is the only variable input, an additional worker increases output from 72 to 78 units, and the product price is $6, the marginal revenue product from an additional worker:
is $36
When a firm evaluates the contribution of a worker to its ____, it must calculate the worker's contribution to revenue, minus the worker's ____.
profits; wage
the market supply curve for labor
shows the relationship between the wage rate and the quantity of labor that workers are willing to supply.
Which of the following does NOT contribute to increased worker productivity?
increased labor supply
If the demand for software engineers ____ more slowly than does supply, wages of software engineers will ____
increase; fall
Which of the following will NOT contribute to higher wage rates for labor?
significantly relaxed immigration standards
Which of the following will NOT result in a leftward shift of the market demand curve for labor?
an increase in the wage rate
improvements in the productivity of labor will tend to
increase wages
Which of the following is the best example of an investment in human capital?
a summer internship at a law firm filled by someone attending law school
which of the following is false
an increase in wage will lead to an increase in the supply of labor
Wages are approximately ____ higher in union jobs than in comparable nonunion jobs.
15%
Not all similarly skilled workers are included in unions. As a result, wages for unionized workers tend to be ____ than for nonunion workers. Additionally, as a significant number of skilled workers seek work in the nonunion sector, the supply curve for nonunion labor shifts to the ____, thereby ____ wages for nonunion workers.
higher; right; reducing
Which of the following is not part of an argument that unions lead to increased productivity?
benefits from featherbedding
Since the 1980s the proportion of income received by the top (richest) 5 percent of Americans has ____, and the measured income of Americans in the lowest (poorest) fifth has ____.
risen; fall
With regard to the income quintile (20% of the population) listings below, which one indicates the greatest degree of income inequality?
b
an example of in-kind income is
subsidized housing
Scholars argue that government activity should be considered when evaluating the measured income distribution because:
the middle and higher-income quintiles have benefited more than the poor from state-subsidized airports, airlines, operas, and museums.
Which of the following changes would tend to increase measured income inequality?
an increase in the number of divorced people
which of the following countries has the greatest degree of income inequality
the US
The official poverty rate for the United States for a family of four is approximately:
$20,000
The poverty rate in the United States is defined as the proportion of the population that fails to earn a ____ absolute income standard. Poverty rates in the United States have largely ____ since the year 2000.
minimum; risen
Ceteris paribus, if the cost of feeding and housing a family were to increase, it would increase a family's level of ____ poverty.
absolute
under a progressive tax system
higher marginal taxes are imposed on higher incomes
A major macroeconomic goal of nearly every society is:
all the above
The first formal acknowledgement of the primary macroeconomic goals of price stability, high employment, and promoting economic growth in the United States came with passage of the:
the Employment Act of 1946
The unemployment rate is the number of people classified as unemployed as a percentage of:
the labor force
the labor force equals
the number of employed plus the number of unemployed persons
Kathryn chooses to go to college full-time rather than to work. Kathryn:
is not part of the labor force
discouraged workers are defined as those
who have given up looking for a job and are not counted as unemployed.
which of the following individuals are considered officially unemployed
none of the above
The unemployment rate may underestimate the true extent of unemployment if:
many part-time employees would like to work full-time, but are unable to get the additional work.
which of the following is false
none of the above. they are all true
underemployment occurs when
a worker is over-qualified and possesses more skills than his job demands.
Frictional unemployment occurs when:
a worker decides to quit to see a different job
A federal program aimed at retraining the unemployed workers of the declining coal and steel industries is designed to reduce which type of unemployment?
structural
cyclical unemployment arises when
business activity in the macroeconomy declines
which of the following people is structurally unemployed
Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets.
According to Okun's law, a 2 percent increase in cyclical unemployment reduces output by almost:
4%
When unemployment rises above the natural rate it reflects the existence of ____ unemployment.
cyclical
the natural rate of unemployment
is the sum of both frictional and structural unemployment when they are at a maximum.
If the economy is operating with full employment, which of the following is essentially eliminated?
cyclical unemployment
In recent years, economists have come to believe that full employment in the U.S. economy occurs at an unemployment rate between:
4.5% and 5.5%
which of the following is true
all of the above
inflation exists when
the overall price level is rising
In the typical CPI shopping basket, which of the categories below represents the largest percentage of consumer spending?
housing
The GDP deflator represents a somewhat ____ measure of prices that the CPI and the GDP deflator tends to be ____ volatile than the CPI.
broader; less
During an inflationary period, those most likely to suffer reduced wealth are those who are holding their wealth in:
currency
what are creditors harmed by unexpected inflation
Creditors are paid back money with less spending power than when it was originally loaned out.
an unanticipated period of deflation will
redistribute income form borrowers to lenders
given a fixed nominal interest rate on a loan, unanticipated deflation
increases the burden of paying off the loan
which of the following groups would not tend to loss form unexpected inflation
Those whose wages have cost of living adjustment clauses in their contracts
the cost imposed on a firm from changing listed prices are called
the menu costs of inflation
economists use the term "business cycle" to refer to
fluctuations in economic activity, measured by GDP or unemployment
The period of declining growth in real GDP, between the peak of the business cycle and the trough, is called the:
contractionary phase
in the expansion phase of the business cycle
all the above
Unemployment rises in ____, and falls in ____.
contractions; expansions
Which of the following observations concerning phases of a business cycle is NOT correct?
maximum amount of unemployment occurs exactly at the trough
economists usually use the term "recession" to refer to
two or more consecutive quarters of declining real GDP
Which of the following describes the historical record of the business cycle in the United States?
periods of contraction seem to have gotten shorter over time
which of the following is true
The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude
the type of unemployment that occurs because of a recession is called
cyclical unemployment
which of the following is not a leading economic indicator
unemployment rate
Which of the following observations concerning leading economic indicators is true?
they provide warnings of likely downturns