question
Using economic theory requires that one _______ nonessential items and ________ what is relevant.
-study; decide
-abstract from; concentrate on
-focus on; respect
-study; decide
-abstract from; concentrate on
-focus on; respect
answer
abstract from; concentrate on
question
Select all that apply. Microeconomics studies:
-Workers
-Firms
-Industries
-Consumers
-Inflation
-Government spending
-Unemployment
-Workers
-Firms
-Industries
-Consumers
-Inflation
-Government spending
-Unemployment
answer
-Workers
-Firms
-Industries
-Consumers
-Firms
-Industries
-Consumers
question
Because businesses seek to maximize _______, understanding ________ is helpful.
-market share; microeconomics
-stock prices; macroeconomics
-profits; microeconomics
-salaries; microeconomics
-market share; microeconomics
-stock prices; macroeconomics
-profits; microeconomics
-salaries; microeconomics
answer
profits; microeconomics
question
_______ focuses on the behavior and structure of firms and industries.
-Industrial organization
-Market theory
-Macroeconomics
-Microeconomics
-Industrial organization
-Market theory
-Macroeconomics
-Microeconomics
answer
Industrial organization
question
_______ do not accept the existing business conditions as fixed, but seek to alter the circumstances of competition.
-Business tactics
-Profit maximizations
-Strategic decisions
-Business tactics
-Profit maximizations
-Strategic decisions
answer
Strategic decisions
question
What is given up to use a resource in a business is called ________.
-Opportunity cost
-Strategic cost
-Product cost
-All of the above
-Opportunity cost
-Strategic cost
-Product cost
-All of the above
answer
Opportunity cost
question
Businesses utilize
-resources provided voluntarily
-only resources they must purchase
-both market-supplied resources and owner-supplied resources
-only resources they possess
-resources provided voluntarily
-only resources they must purchase
-both market-supplied resources and owner-supplied resources
-only resources they possess
answer
both market-supplied resources and owner-supplied resources
question
Total economic costs is _________ owner-supplied resources and market-supplied resources.
-the sum of the opportunity costs of both
-the difference between the costs of
-the sum of the wages paid to both
-the sum of the opportunity costs of both
-the difference between the costs of
-the sum of the wages paid to both
answer
the sum of the opportunity costs of both
question
________ costs are the monetary payments made for market-supplied inputs while ________ costs are non-monetary opportunity costs.
-Economic; wage
-Implicit; explicit
-Explicit; implicit
-Capital; implicit
-Economic; wage
-Implicit; explicit
-Explicit; implicit
-Capital; implicit
answer
Explicit; implicit
question
Accounting profit is
-total revenue minus opportunity cost
-total revenue minus total economic cost
-total revenue minus explicit cost
-total revenue minus implicit cost
-total revenue minus opportunity cost
-total revenue minus total economic cost
-total revenue minus explicit cost
-total revenue minus implicit cost
answer
total revenue minus explicit cost
question
Business owners should maximize economic profits because
-accounting profit ignores explicit cost.
-economic profit includes all revenues.
-economic profit ignores implicit cost.
-accounting profit ignores implicit cost
-accounting profit ignores explicit cost.
-economic profit includes all revenues.
-economic profit ignores implicit cost.
-accounting profit ignores implicit cost
answer
accounting profit ignores implicit cost
question
The value of the firm is calculated as
-the present value of future accounting profits.
-the sum of all expected future profits.
-the value of all assets.
-the present value of future economic profits
-the present value of future accounting profits.
-the sum of all expected future profits.
-the value of all assets.
-the present value of future economic profits
answer
the present value of future economic profits
question
True or false: Maximizing profit in each period will always result in the maximum value of the firm.
answer
False
question
Which of the following leads to the principal-agent problem?
-The principal decides to maximize the price for which the firm can be sold.
-The principal and the agent have different objectives.
-The principal cannot enforce the contract agent or finds it too costly to monitor the agent.
-The principal decides to maximize the price for which the firm can be sold.
-The principal and the agent have different objectives.
-The principal cannot enforce the contract agent or finds it too costly to monitor the agent.
answer
The principal and the agent have different objectives. The principal cannot enforce the contract agent or finds it too costly to monitor the agent.
question
Examples of ways principals can control agent behavior include
-linking directors' compensation to the value of the firm
-requiring equity financing
-tying managers' compensation to fulfilling the goals of shareholders
-linking directors' compensation to the value of the firm
-requiring equity financing
-tying managers' compensation to fulfilling the goals of shareholders
answer
linking directors' compensation to the value of the firm and tying managers' compensation to fulfilling the goals of shareholders
question
Business owners should seek to maximize
-economic profit.
-output.
-accounting profit.
-total revenue
-economic profit.
-output.
-accounting profit.
-total revenue
answer
Economic profit
question
A _______ firm has many competitors, while a _______ firm has a product that is different from other products.
-profitable; unprofitable
-price-setting; price-taking
-price-taking; price-setting
-unprofitable; profitable
-profitable; unprofitable
-price-setting; price-taking
-price-taking; price-setting
-unprofitable; profitable
answer
price-taking; price-setting
question
A(n) ______ is any arrangement through which buyers and sellers exchange final goods or services, resources used for production or anything of value.
-market
-store
-auction
-contract
-market
-store
-auction
-contract
answer
Market
question
Owners of a firm want the managers to make business decisions that will
-minimize net costs in each period of operation.
-maximize total revenues.
-maximize the market share of the firm.
-maximize the value of the firm.
-minimize net costs in each period of operation.
-maximize total revenues.
-maximize the market share of the firm.
-maximize the value of the firm.
answer
maximize the value of the firm
question
Markets exist
-to benefit sellers.
-to reduce transaction costs.
-to benefit buyers.
-to reduce efficiency
-to benefit sellers.
-to reduce transaction costs.
-to benefit buyers.
-to reduce efficiency
answer
to reduce transaction costs
question
Which of the following are the features characterizing market structures?
-The corporate structure.
-The likelihood of new firms entering a market.
-The level of capital investment in research and development.
-The number and size of firms.
-The degree of product differentiation.
-The corporate structure.
-The likelihood of new firms entering a market.
-The level of capital investment in research and development.
-The number and size of firms.
-The degree of product differentiation.
answer
The likelihood of new firms entering a market, the number and size of firms, and the degree of product differentiation
question
A large number of relatively small firms sell a differentiated product:
answer
Monopolistic competition
question
A single firm produces all the product in the market:
answer
Monopoly
question
A large number of small firms producers and sells identical products:
answer
Perfect competition
question
A few firms produce and sell all the product in a market:
answer
Oligopoly
question
Which of the following are markets?
-stock exchange
-grocery
-flea market
-auction
-school supply giveaway
-free carwash
-garage sale
-stock exchange
-grocery
-flea market
-auction
-school supply giveaway
-free carwash
-garage sale
answer
stock exchange, grocery, flea market, auction, garage sale
question
Globalization of markets implies
-firms will have higher costs.
-firms will sell fewer products.
-firms will have less competition.
-the integration of markets around the world.
-firms will have higher costs.
-firms will sell fewer products.
-firms will have less competition.
-the integration of markets around the world.
answer
the integration of markets around the world
question
Quantity ______ is the amount of a good or service that consumers in a market are willing and able to purchase during a given period of time
answer
demanded
question
The three types of demand relations are:
-general demand functions, inverse demand functions, and direct demand functions
-specific demand functions, inverse demand functions, and direct demand functions
-general demand functions, direct demand functions, and specific demand functions
-general demand functions, inverse demand functions, and direct demand functions
-specific demand functions, inverse demand functions, and direct demand functions
-general demand functions, direct demand functions, and specific demand functions
answer
general demand functions, inverse demand functions, and direct demand functions
question
A change in the quantity demanded of a good can be caused by a change in the:
-price of a factor of production.
-technology that is used in the production of the good.
-number of consumers in the market.
-tastes or preference patterns of consumers.
-expected price of the good in future periods
-price of a factor of production.
-technology that is used in the production of the good.
-number of consumers in the market.
-tastes or preference patterns of consumers.
-expected price of the good in future periods
answer
number of consumers in the market, tastes or preference patterns of consumers, and the expected price of the good in future periods
question
The _____ demand curve is expressed as Qd = f(P, M, PR, Τ, PF, N).
-general
-inverse
-direct
-general
-inverse
-direct
answer
General
question
When the price of a good ___________, the quantity of the good demanded increases.
-Increases
-Decreases
-Increases
-Decreases
answer
Decreases
question
__________ is the amount of a good or service that consumers in a market are willing and able to purchase during a given period of time.
-Total quantity
-Quantity demanded
-Quantity supplied
-Equilibrium quantity
-Total quantity
-Quantity demanded
-Quantity supplied
-Equilibrium quantity
answer
Quantity demanded
question
When a consumer increases the number of a good he demands when his income increases, the good is a(n) ______ good
answer
Normal
question
When income decreases, consumers will decrease the quantity they demand of a(n) __________ good.
-inferior
-cheap
-normal
-Expensive
-inferior
-cheap
-normal
-Expensive
answer
Normal
question
The six principle variables that influence the quantity demanded of a good or service are:
-the price of the good or service.
-the tastes or preference patterns of consumers.
-the expected future price of the product.
-the number of sellers in the market.
-the incomes of consumers.
-the number of consumers in the market.
-the size of families in the market.
-the prices of inputs of production.
-the prices of related goods and services.
-the price of the good or service.
-the tastes or preference patterns of consumers.
-the expected future price of the product.
-the number of sellers in the market.
-the incomes of consumers.
-the number of consumers in the market.
-the size of families in the market.
-the prices of inputs of production.
-the prices of related goods and services.
answer
The price of the good or service, the tastes or preference patterns of consumers, the expected future price of the product, the incomes of consumers, the number of consumers in the market, the prices of related goods and services
question
The ______ demand curve is expressed as Qd = f(P, M, PR, Τ, PE, N).
answer
general
question
When income increases, consumers will decrease their quantity demanded of a(n) _____ good
answer
Inferior
question
Which of the following are examples of substitutes?
-Toyotas and Chryslers
-Pepsi and Coke
-Peanut butter and jelly
-Hamburgers and hot dogs
-Socks and shoes
-Toyotas and Chryslers
-Pepsi and Coke
-Peanut butter and jelly
-Hamburgers and hot dogs
-Socks and shoes
answer
Toyotas and Chryslers, Pepsi and Coke, and Hamburgers and hot dogs
question
Goods are substitutes if:
-they can be used in place of each other
-consumers increase the quantity purchased if incomes increase
-consumers increase the quantity purchased if prices decrease
-they can be used together
-they can be used in place of each other
-consumers increase the quantity purchased if incomes increase
-consumers increase the quantity purchased if prices decrease
-they can be used together
answer
They can be used in place of each other
question
If the price of Toyotas increases, the demand for Chryslers will:
-stay the same
-decrease
-increase
-stay the same
-decrease
-increase
answer
increase
question
Ceteris paribus, which of the following is likely to cause a change in the quantity demanded of a good?
-A change in the income of consumers
-A change in the cost of producing one unit of the good
-A change in the price of the good
-A change in the price of a related good
-A change in technology that is used in the production of the good
-A change in the income of consumers
-A change in the cost of producing one unit of the good
-A change in the price of the good
-A change in the price of a related good
-A change in technology that is used in the production of the good
answer
A change in the income of consumers, a change in the price of the good, and a change in the price of a related good
question
Which of the following goods are examples of complementary goods?
-Pen and paper
-Butter and margarine
-Shorts and pants
-Shoes and socks
-Peanut butter and jelly
-Pen and paper
-Butter and margarine
-Shorts and pants
-Shoes and socks
-Peanut butter and jelly
answer
Pen and paper, shoes and socks, and peanut butter and jelly
question
If the demand for one good increases when the price of another good decreases, the goods are
-normal
-inferior
-complements
-substitutes
-normal
-inferior
-complements
-substitutes
answer
complements
question
Suppose cupcakes and cookies are substitutes. If the price of cupcakes decreases, the demand for cookies will _____.
-stay the same
-increase
-decrease
-stay the same
-increase
-decrease
answer
Decrease
question
Consumers who expect that the price of a good will increase in the future, they will likely _________ their demand for the good in the current period.
-increase
-decrease
-leave unchanged
-increase
-decrease
-leave unchanged
answer
Increase
question
An decrease in the number of consumers in the market will _________ the demand for the good.
-decrease
-increase
-not change
-decrease
-increase
-not change
answer
Decrease
question
A recent scientific report states that eggs are a good source of protein and help reduce the risks of some cancers. After the report got published, it is being observed that the demand for eggs has:
-increased, other things remaining constant
-stayed the same, other things remaining constant
-decreased, other things remaining constant
-increased, other things remaining constant
-stayed the same, other things remaining constant
-decreased, other things remaining constant
answer
increased, other things remaining constant
question
True or false: Economists and market researchers often express the general demand function as the relationship only between price and quantity.
answer
False
question
The ______ parameter in a linear function measures the effect on the dependent variable of changing one of the independent variable.
answer
Slope
question
A direct demand function is an equation that shows
-how quantity demanded is related to product price
-how price is related to quantity demanded
-how quantity demanded is related to input price
-how quantity demanded is related to quantity supplied
-how quantity demanded is related to product price
-how price is related to quantity demanded
-how quantity demanded is related to input price
-how quantity demanded is related to quantity supplied
answer
how quantity demanded is related to product price
question
A ____________ shows a list of several prices and the quantity demanded per period of time at each of the prices, holding all variables other than price constant.
-demand schedule
-demand function
-demand graph
-demand schedule
-demand function
-demand graph
answer
demand schedule
question
The inverse demand function is the demand function when
-quantity is expressed as a function of price
-price is expressed as a function of quantity
-quantity is expressed as a function of all the variables affecting quantity
-price is expressed as a function of all the variables affecting price
-quantity is expressed as a function of price
-price is expressed as a function of quantity
-quantity is expressed as a function of all the variables affecting quantity
-price is expressed as a function of all the variables affecting price
answer
Price is expressed as a function of quantity
question
A direct demand function can be shown by:
-a sentence.
-an equation.
-a graph.
-a table
-a schedule
-a sentence.
-an equation.
-a graph.
-a table
-a schedule
answer
An equation, a graph, a table, and a schedule
question
The demand price is
-the minimum price consumers will pay for a specific amount of a good or service
-the maximum price consumers will pay for a specific amount of a good or service
-the only price consumers will pay for a specific amount of a good or service
-the minimum price consumers will pay for a specific amount of a good or service
-the maximum price consumers will pay for a specific amount of a good or service
-the only price consumers will pay for a specific amount of a good or service
answer
the maximum price consumers will pay for a specific amount of a good or service
question
The law of demand says that quantity demanded will _________ when prices fall.
-increase
-decrease
-stay the same
-increase
-decrease
-stay the same
answer
Increase
question
A change in quantity demanded occurs when:
-variables affecting demand other than price changes.
-price changes.
-variables affecting demand other than price changes.
-price changes.
answer
price changes
question
The __________ are variables that change the quantity demanded at each price and determine where the demand curve is located.
-pricing variables
-prices
-determinants of demand
-demand variables
-pricing variables
-prices
-determinants of demand
-demand variables
answer
determinants of demand
question
A change in demand
-results from a price change
-forces a shift of the supply curve
-is the same as a change in quantity demanded
-is a rightward or leftward shift of the demand curve
-results from a price change
-forces a shift of the supply curve
-is the same as a change in quantity demanded
-is a rightward or leftward shift of the demand curve
answer
Is a rightward or leftward shift of the demand curve
question
Quantity _____is the amount of a good or service offered for sale during a given period of time
answer
Supplied
question
The six principle variables that influence the quantity supplied of a good include:
-the price of the good
-the expectations of producers of the future price of the good
-the prices of goods related in consumption
-the prices of inputs used to produce the good
-the number of buyers in the market
-the incomes of consumers
-the number of firms in the industry
-the level of available technology
-the prices of goods related in production
-the price of the good
-the expectations of producers of the future price of the good
-the prices of goods related in consumption
-the prices of inputs used to produce the good
-the number of buyers in the market
-the incomes of consumers
-the number of firms in the industry
-the level of available technology
-the prices of goods related in production
answer
The price of the good, the expectations of producers of the future price of the good, the prices of inputs used to produce the good, the number of firms in the industry, the level of available technology, and the prices of goods related in production
question
When one of the determinants of demand changes, there is a
-change in quantity demanded
-change in demand
-change in quantity demanded
-change in demand
answer
Change in demand
question
The general supply function is
-the relation between supply and demand
-the relation between the quantity supplied and the six factors that jointly affect quantity supplied
-the relation between the quantity supplied and price, holding all other factors that affect quantity supplied constant
-the relation between supply and demand
-the relation between the quantity supplied and the six factors that jointly affect quantity supplied
-the relation between the quantity supplied and price, holding all other factors that affect quantity supplied constant
answer
the relation between the quantity supplied and the six factors that jointly affect quantity supplied
question
____ is the state of knowledge concerning the combination of resources to produce goods and services
answer
Technology
question
If the firm expects the price of a good they produce to fall in the future, they will likely __________ the amount of the good on the market now.
-Increase
-Leave unchanged
-Decrease
-Increase
-Leave unchanged
-Decrease
answer
Increase
question
__________ is the state of knowledge concerning the combination of resources to produce goods and services.
-Supply
-Production
-Technology
-Information
-Supply
-Production
-Technology
-Information
answer
Technology
question
The direct supply function can be stated as a(n)
-graph
-sentence
-equation
-table
-inequality
-graph
-sentence
-equation
-table
-inequality
answer
Graph, equation, and table
question
A change in quantity supplied is
-a change in equilibrium quantity
-a movement along the supply curve
-a shift of the supply curve
-a change in equilibrium price
-a change in equilibrium quantity
-a movement along the supply curve
-a shift of the supply curve
-a change in equilibrium price
answer
a movement along the supply curve
question
An equation that shows the quantity supplied as a function of only the price of the good is called
-a direct supply curve
-an indirect supply curve
-a general supply curve
-a direct demand curve
-a direct supply curve
-an indirect supply curve
-a general supply curve
-a direct demand curve
answer
a direct supply curve
question
The supply function when price is expressed as a function of quantity is
-supply
-the supply curve
-the general supply function
-the inverse supply function
-supply
-the supply curve
-the general supply function
-the inverse supply function
answer
The inverse supply function
question
A(n) ___________ in supply is caused by a change in a determinant of supply that increase quantity at every price.
-Increase
-Decrease
-Increase
-Decrease
answer
Increase
question
An increase in supply is
-a movement down the supply curve
-a movement to the right of the supply curve
-a movement to the left of the supply curve
-a movement up the supply curve
-a movement down the supply curve
-a movement to the right of the supply curve
-a movement to the left of the supply curve
-a movement up the supply curve
answer
A movement to the right of the supply curve
question
The amount of a good bought and sold at market equilibrium is
-equilibrium quantity
-quantity supplied
-equilibrium price
-demand
-equilibrium quantity
-quantity supplied
-equilibrium price
-demand
answer
Equilibrium quantity
question
Excess demand exists when quantity demanded ___________ quantity supplied.
-is greater than
-is less than
-equals
-is greater than
-is less than
-equals
answer
Is greater than
question
The market clearing price is the price when _____ can purchase and sell the quantity they want, respectively.
-sellers
-neither buyers nor sellers
-both buyers and sellers
-buyers
-sellers
-neither buyers nor sellers
-both buyers and sellers
-buyers
answer
Both buyers and sellers
question
When the prevailing price is _________ equilibrium price, a surplus exists.
-equal to
-lower than
-higher than
-equal to
-lower than
-higher than
answer
Higher than
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