question
Which of the following is an example of market 'production," as used by economists
answer
The theater and film Studies department in fine arts college stages a play at the Local theater
question
A firms cost of production is determined by all of the following except
answer
the amount of corporate taxes it must pay on its profit.
question
The difference between technology and technological change is that
answer
technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs.
question
Which of the following is a factor of production that generally is fixed in the short run?
answer
a factory building
question
Which of the following is an example of a long run adjustment?
answer
Wal-Mart builds another Supercenter.
question
Which of the following is the best example of a short run adjustment?
answer
Your local Wal-Mart hires two more associates.
question
Economic costs of production differ from accounting costs in that
answer
economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.
question
Which of the following is an implicit cost of production?
answer
rent that could have been earned on a building owned and used by the firm
question
Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move,
answer
her implicit cost falls and her explicit cost rises.
question
Golds Rush quit her job as a manager for Home Depot to start her own hairdressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5% interest) and borrowed $10,000 from a close friend, agreeing to pay 5% interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs for the first year?
answer
$42,000
question
Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers
answer
$2.40
question
If 4 workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is
answer
Two chairs
question
The law of diminishing marginal returns
answer
Explains why the average total cost and marginal cost curve are U-shaped in the short run
question
Who was the economist who first analyze the advantages of specialization and the division of labor?
answer
Adam Smith
question
One reason why, in the short run, the marginal product of labor might increase initially as more workers are hired is that
answer
specialization allows a worker to focus on one task, thereby increasing her proficiency at that task
question
In the short run, the marginal product is at its maximum, then the
answer
Marginal cost is at its minimum
question
When a firm produces 50,000 units of output, it's total cost equals $6.5 million. When it increases its production to 70,000 units of output, it's total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is
answer
$145
question
When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is
answer
50
question
Which of the following statements is true?
answer
A) the average product of labor is at its minimum on the average product of labor equals the marginal product of labor. B) whatever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing. C) the average product of labor tells us how much output changes the quantity of workers hired changes. D) the average product of labor is at its maximum the average product of labor equals the marginal product of labor.
D.
D.
question
Long-run cost curves are U-shaped because
answer
economies and diseconomies of scale
question
Over the past 20 years, the number of small family farms has fallen significantly and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?
answer
Economies of scale in farming
question
The minimum efficient scale is
answer
The smallest level of operation were long run average costs are lowest
question
If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide _—— to the airlines
answer
Economies of scale
question
Assume that the market for cage free eggs is perfectly competitive. All else equal, as more farmers choose to produce and sell cage free eggs, what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?
answer
The equilibrium price is likely to decrease and profits are likely to decrease
question
Assume that the market for cage free eggs is perfectly competitive. All else equal, as farmers find it less profitable to produce and sell cage free eggs in this market
answer
The supply curve will shift to the left and the equilibrium price will increase
question
Which of the following is not a characteristic of a monopolistically competitive market structure?
answer
Each firm must react to actions of other firms
question
Which of the following is a characteristic of a monopoly?
answer
There is only one seller in the market
question
A very large number of small sellers who sell identical products imply
answer
The inability of one seller to influence the price
question
Which of the following is the best example of a perfectly competitive industry?
answer
The Wheat market
question
Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?
answer
The firm will not sell any output.
question
The demand curve for each sellers product in perfect competition is horizontal at the market price because
answer
each seller is too small to affect market price.
question
Jason, a high school student, mows lawns for families in his neighborhood. The going rate is $12 for each lawnmowing service. Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen if Jason raised his price?
answer
If Jason raises his price he will lose all his customers
question
Which of the following is the best example of a perfectly competitive firm?
answer
a corn farmer in Illinois
question
If the market price is $25 the average revenue of selling five units is
answer
$25
question
If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth is
answer
$25
question
If the market price of each camera case is eight dollars, what is the profit maximizing quantity according to the MR = MC rule?
answer
400 units
question
If the market price of each camera case is eight dollars and the firm maximizes profit, what is the amount of the firms profit or loss?
answer
Profit of $440
question
The firm will not produce in the short run if the output price falls below
answer
$2.80
question
If the firm is producing 700 units,
answer
it should cut back its output to maximize profit.
question
What is the amount of profit if. The firm produces Q2 units?
answer
It is equal to the vertical distance C to G
question
The firm breaks even at an output level of
answer
Q4 units
question
Why is the total revenue curve a ray from the origin?
answer
Because the firm can sell it's product at a constant price
question
In a graph that illustrates a perfectly competitive firm, the marginal revenue curve is
answer
The same as the firms demand curve
question
If a perfectly competitive Apple Farm is marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?
answer
Increase output
question
A perfectly competitive Apple Farm produces 1000 bushels of apples at a total cost of $36,000. The price of each bushel is $50. Calculate the firm's short run profit or loss
answer
Profit of $14,000
question
If a perfectly competitive firms price is above average total cost, the firm
answer
Is earning a profit
question
Suppose the prevailing price is P1 in the firm is currently producing its loss minimizing quantity. Identify the area that represents the loss
answer
P3cbP1
question
If the market price is $45, the firm
answer
Will earn a profit of $1040
question
If the market price is $30, the firms profit maximizing output level is
answer
180
question
What is the amount of its total fixed cost?
answer
$2520
question
Suppose the prevailing price is $20 and the firm is currently producing 1350 units. In the long run equilibrium
answer
There will be more firms in the industry and total industry output increases
question
If a typical firm in a perfectly competitive industry is earning profits, then
answer
new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease
question
Consider a typical firm and perfectly competitive industry that make short run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long run equilibrium?
answer
Panel B
question
Consider a typical firm in a perfectly competitive industry which is incurring short run losses. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long run equilibrium?
answer
Panel A
question
The perfectly competitive market structure benefits consumers because
answer
firms are forced by competitive pressure to be as efficient as possible
question
If the long run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is
answer
The minimum efficient scale
question
A Perfectly competitive industry achieves allocative efficiency when
answer
Goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it
question
What is productive efficiency?
answer
a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
question
If the market price is P1, what is the allocatively efficient output level?
answer
Q1
question
Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?
answer
Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run
question
The reason that the fast casual restaurant market is monopolistically competitive rather than perfectly competitive is because
answer
Products are differentiated
question
The key characteristics of a monopolistically competitive market structure include
answer
many small (relative to the total market) sellers acting independently.
question
All of the following characteristics are common to both monopolistic competition in perfect competition except
answer
firms take market prices as given
question
Which of the following is true for a firm with a downward sloping demand curve for its product?
answer
Price equals average revenue but is greater than marginal revenue.
question
If a firm faces a downward sloping demand curve,
answer
it must reduce its price to sell more units
question
A monopolistically competitive firm faces a downward sloping demand curve because
answer
product differentiation
question
For a monopolistically competitive firm, marginal revenue
answer
is less than the price
question
What a monopolistically competitive firm cuts it's price increase its sales experience as a gain revenue due to the
answer
Output effect
question
When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the
answer
price effect
question
What portion of the marginal revenue of the fourth unit is due to the output effect in what portion is due to the price effect?
answer
Output effect equals six dollars; price effect equals -$1.50
question
The marginal revenue from the increase in price from P0 to P1 equals
answer
The area (A minus D)
question
Which of the following is the best example of a firm that competes in a monopolistically competitive market?
answer
A movie theater
question
The jeans store sells seven pairs of jeans per day when it charges $100 per pair it. It sells eight pairs of jeans per day at a price of $90 per day the marginal revenue of the eighth pair of jeans is
answer
$20
question
A monopolistically competitive firm maximizes profit where
answer
price > marginal cost
question
What is the output ( Q) that maximizes profit and what is the price (P) charged?
answer
P equals $50; Q = six cases
question
What is eco energies profit?
answer
$145
question
How much additional profit will be made if the firm chooses to produce and sell five cases instead of four cases?
answer
$20
question
What is likely to happen to the products price in the long run?
answer
It will fall
question
If the firm represented in the diagram is currently producing and selling QA units, what is the price charged?
answer
P2
question
What is the area that represents the total revenue made by the firm?
answer
0P2cQa
question
What is the area that represents the total variable cost of production?
answer
0P1bQa
question
What is the area that represents the total fixed cost of production?
answer
P1bdP3
question
What is the area that represents the loss incurred by the firm?
answer
The area P2CDP3
question
Should the firm represented in the diagram continue to stay in business despite its losses?
answer
Yes, its total revenue covers its variable cost.
question
In the short run, a profit maximizing firms decision to produce should be guided by whether
answer
It's total revenue covers it's variable cost
question
What are the profit maximizing/loss minimizing output level and price?
answer
Q equals four; P equals $17
question
What is the amount of the firms loss at its optimal output level?
answer
$41
question
Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?
answer
Panel C
question
Which of the graphs in the figure to pick the monopolistically competitive firm that is earning economic profits?
answer
Panel a
question
A monopolistically competitive industry that earns economic profits in the short run will
answer
experience the entry of new rival firms into the industry in the long run
question
In the long run, if price is less than average cost
answer
there is an incentive for firms to exit the market.
question
In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short run profits?
answer
The demand curve will shift to the left and become more elastic
question
If a typical monopolistically competitive firm is incurring short run losses, then
answer
As some firms leave, the remaining firms will experience an increase in the demand for their products
question
Why do most firms in monopolistic competition typically makes zero profit in the long run?
answer
Because the lack of entry barriers would compete away profits
question
What is the area that represents the firms profit?
answer
P4edP2
question
What is the area that represents the firms total cost?
answer
P2DQ40
question
How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?
answer
A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible.
question
Long run equilibrium under monopolistic competition is similar to that under perfect competition in that
answer
firms earn normal profits
question
Is a monopolistically competitive firm productively efficient?
answer
No, because it does not produce at minimum average total cost.
question
Is a monopolistically competitive firm allocatively efficient?
answer
No, because price is greater than marginal cost
question
What is the allocatively efficient output for the firm represented in the diagram?
answer
Qh units
question
What is the productively efficient output for the firm represented in the diagram?
answer
Qj units
question
Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is
answer
less elastic because monopolistically competitive firms produce similar, but not identical, products.
question
Which of the following is a disadvantage of trademarking a firm's product?
answer
A trademark may become so widely used to denote a particular type of product that the trademark may no longer be a legally protected brand name
question
When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to
answer
Convince customers that it's card has greater value than those offered by rival firms
question
A franchise is
answer
A branch of a national company
question
Firms use to marketing tools to differentiate their products. What are these two tools?
answer
Brand management and advertising
question
One goal a firm tries to achieve when it advertises a product is to
answer
make the demand curve for the product more inelastic
question
Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrance into the market. An example that has been used to illustrate this is
answer
The introduction of the first ball point pen in 1945
question
By marketing to recreational marijuana users, Josh Schneider is trying to set his business apart from competing hotels and lodging establishments. All else equal, if his concept remain successful, in the long run we would suspect Schneider to experience
answer
Increased competition and lower economic profits
question
The firm cannot control all of the factors that allow it to make economic profits. Which of the following is an example of an uncontrollable factor?
answer
Input prices
question
The marketing of the first ballpoint pen by Milton Reynolds showed
answer
That being the first firm to market a product may not lead to a long lived advantage of a later entrance into the market
question
In a monopolistically competitive market, a successful new restaurant
answer
Will earn zero economic profit in the long run because a free entry, but competition will lead restaurants to offer different versions of the same product
question
The reason that the Fishermans friend restaurant in Stonington, Maine had a monopoly on selling seafood dinners in that town is most likely due to
answer
No competitors apparently found the profit level attractive enough to enter the market
question
If we use a narrow definition of monopoly, then a monopoly is defined as a firm
answer
that can ignore the actions of all other firms because it produces a product for which there are no close substitutes.
question
In Walnut Creek, California, there are three very popular supermarkets: Safeway, Whole Foods, and Lunardi 's. While Safeway remains open 24 hours a day Whole Foods and lunardis close at 9 PM. Which of the following statements is true?
answer
Safeway has a monopoly at midnight but not during the day
question
For decades, the NCAA restricted the number of college football and basketball games that could be televised, and in 1982 the University of Georgia in the University of Oklahoma sued the NCAA under the federal anti-trust laws. In 1984, the Supreme Court decided the case
answer
Against the NCAA, citing anti-competitive practice
question
Compared to a monopolistic competitor, a monopolist faces
answer
a more inelastic demand curve
question
To maintain a monopoly, a firm must have
answer
an insurmountable barrier to entry
question
A monopoly differs from monopolistic competition in that
answer
in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure.
question
Consider the following characteristics: a. A market structure with barriers to entry B. Demand curves that are easily identified C. Firm cannot make zero profits in the long run D. Firm can reap long run profits
Which of the characteristics in the list above is shared by an oligopolist and a monopolist?
Which of the characteristics in the list above is shared by an oligopolist and a monopolist?
answer
A and D
question
Few firms in the United States are monopolies because
answer
when a firm earns profits, other firms will enter its market.
question
Using a broad definition, a firm would have a monopoly if
answer
there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run
question
Recently, the NCAA agreed to loosen one of its key rules
answer
By allowing colleges the freedom to reimburse athletes for the full cost of attending college
question
A Monopolists profit maximizing price and output correspond to the point on a graph
answer
Where marginal revenue equals marginal cost and charging the price on the market demand curve for that output
question
Because a monopoly's demand curve is the same as the market demand curve for its product,
answer
The monopoly must lower its price to sell more of its product
question
If a monopolist marginal revenue is $25 a unit and it's marginal cost is $25, then
answer
To maximize profit the firm should continue to produce the output it is producing
question
To maximize profit, the firm will produce at output level
answer
Q2
question
The firms profit maximizing price is
answer
P3
question
If the firms average total cost curve is ATC1, the firm will
answer
Make a profit
question
If the firms average total cost curve is ATC two, the firm will
answer
Break even
question
If the firms average total cost curve is ATCthree, the firm will
answer
Suffer a loss
question
What is the marginal revenue from the sale of the 12th unit?
answer
$20
question
What is the firms profit maximizing output and what is the price charge to sell this output?
answer
P equals $70; Q equals 13
question
When producing the profit maximizing output, what is the amount of the firms profit?
answer
$350
question
Long run economic profits would most likely exist in which market structure?
answer
Monopoly and oligopoly
question
Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit
answer
Loss of seven dollars per unit
question
What is the amount of the monopoly's total revenue?
answer
$20,400
question
The monopolist's total cost is
answer
$1240
question
If Comcast maximizes its profit how much profit will earn?
answer
Four dollars
question
Which of the following statements is true?
A. Unlike other industries, monopoly industries have a high barriers to entry
B. Unlike other firms a monopolist demand curve is the same as the market demand curve
C. Only monopoly firms are granted patents and copyrights
D. Monopolists are price makers. All other firms are price takers
A. Unlike other industries, monopoly industries have a high barriers to entry
B. Unlike other firms a monopolist demand curve is the same as the market demand curve
C. Only monopoly firms are granted patents and copyrights
D. Monopolists are price makers. All other firms are price takers
answer
B
question
What is the economically efficient output level?
answer
940 units
question
What is the difference between the monopoly output in the perfectly competitive output?
answer
340 units
question
What is the difference between the monopolist price in perfectly competitive industry price?
answer
The monopolies price is higher by $13
question
Why does a monopoly cause a deadweight loss?
answer
Because it stops producing output at a point where price is above marginal cost
question
Relative to a perfectly competitive market, a monopoly results in
answer
a gain in producer surplus less than the loss in consumer surplus.
question
The deadweight loss due to a monopoly is represented by the area
answer
FHE
question
Market power refers to
answer
the ability of a firm to charge a price higher than the marginal cost of production.
question
Following the entry of Verizon, the subscription price falls from PM to PC. What is the increase in consumer surplus as a result of this change?
answer
The area B plus C plus D
question
What is the amount of consumer surplus if, instead of a monopoly, the industry was organized as a perfectly competitive industry?
answer
$332
question
Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power. Harberger found that
answer
the loss of economic efficiency in the U.S. economy due to market power was less than 1 percent of the value of production.
question
The first important federal law passed to regulate monopolies in the United States was the
answer
Sherman act
question
The Sherman Act prohibited
answer
collusive price agreements among rival sellers.
question
A merger between the Ford motor company in general motors would be an example of a
answer
Horizontal merger
question
Emerge are between US steel and general motors would be an example of a
answer
Vertical merger
question
A Herfindahl-Hirschmann index is calculated by
answer
Summing the squares of the market shares of each firm in the industry
question
Consider an industry that is made up of nine firms, each with a market share (percent of sales) as follows:
A. Firm a: 30%
B. Fir, b: 20%
C. Firms C,D and E: 10% each
D. Firms F,G,H and J: 5% each
What is the value of the four firm concentration ratio and how is the industry categorized?
A. Firm a: 30%
B. Fir, b: 20%
C. Firms C,D and E: 10% each
D. Firms F,G,H and J: 5% each
What is the value of the four firm concentration ratio and how is the industry categorized?
answer
70%; oligopoly
question
Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows:
A. Firm a: 30%
B. Fir, b: 20%
C. Firms C,D and E: 10% each
D. Firms F,G,H and J: 5% each
What is the value of the herfindahl-hirschmann index?
A. Firm a: 30%
B. Fir, b: 20%
C. Firms C,D and E: 10% each
D. Firms F,G,H and J: 5% each
What is the value of the herfindahl-hirschmann index?
answer
1700
question
In 2017, the department of justice was investigating pharmaceutical companies regarding the pricing of generic drugs. This is an example of attempts by the government
answer
To keep firms from colluding to raise prices
question
Natural monopolies in the United States are generally regulated by
answer
Local or state regulatory commissions
question
If the government regulates Erickson power Company so that the farm can earn a normal profit, the price would be set at —- in the output level is —-
answer
P2, Q3
question
What is the economically efficient output level and what is the price at that level?
answer
Q4, P1
question
Which anti-trust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms
answer
The Clayton act
question
Baxter International a manufacturer of hospital supplies, acquired American hospital supply, the distributor of hospital supplies. This is an example of
answer
A vertical merger
question
Congress has divided the authority to police murders between the antitrust division of the US department of justice (AD) in the federal trade commission (FTC). How is this authority divided?
answer
Both the A.D. and the FTC are responsible for merger policy
question
If the herfindahl-hirschmann index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the index for a given industry is true
answer
If a merger would result in an index value less than 1500, the merger would not be challenged
question
The music streaming industry, where a firms profitability depends on its interactions with other firms, is an example of
answer
Oligopoly
question
Which of the following is not part of an oligopolists business strategy
answer
meeting worker health and safety standards required of all firms
question
Producing a homogeneous product occurs in which of the following industries?
answer
oligopoly and perfect competition
question
Producing a differentiated product occurs in which of the following industries?
answer
monopolistic competition and oligopoly
question
The value of the four firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is
answer
anything greater than 40 percent
question
The "discount department stores" industry is highly concentrated. What does this mean?
answer
A few large stores account for a significant portion of industry sales
question
An oligopolist's demand curve is
answer
unknown because a response of firms to price changes by rivals is uncertain
question
An example of a barrier to entry is
answer
Occupational licensing
question
Which of the following is important in determining the extent of competition in an industry?
answer
the minimum efficient scale of production relative to market demand
question
Economies of scale will create a barrier to entry in an oligopoly when
answer
The typical firms long run average total cost curve reaches its minimum level at a level of output that is a large fraction of total industry sales
question
Hewlett-Packard Will not raise the prices of its personal computers without first considering how Dell might respond. This is evidence of
answer
interdependence
question
Which government agency publishes four-firm concentration ratio's?
answer
The US bureau of the census
question
A consequence of the quota that has been imposed on the importation of sugar into the United States is
answer
Competition in the US sugar market is reduced
question
Instead of actions that a firm takes to achieve a goal, such as maximizing profits, is called
answer
A business strategy
question
A dominant strategy
answer
is one that is the best for a firm, no matter what strategies other firms use.
question
A Nash equilibrium is
answer
reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.
question
Is the current strategy in which each firm charges the low price and earns a profit of $7000 and Nash equilibrium? If not, why and what is a Nash equilibrium?
answer
Yes, the current situation is a Nash equilibrium
question
For each firm, is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7000?
answer
Yes, the firms can implicitly collude and agree to charge a higher price
question
Suppose Walmart and target both advertise they will match the lowest price offered by any competitor. What is the purpose of such a strategy?
answer
To signal to each other that they intend to charge the high price
question
Suppose pricing Play stations is a repeated game in which Walmart and target will be selling the game system in competition over a long period of time. In this case, what is the most likely outcome?
answer
A cooperative equilibrium in which each firm charges the high price
question
In most business situations where firms compete, often they can escape the prisoners dilemma and reach the most profitable outcome. Which of the following is a reason for this?
answer
Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate.
question
In an oligopoly, firms can increase their market power by
answer
colluding to set prices
question
When top managers of all four major airlines publicly stated that they intended to undertake only modest increases in capacity by buying additional planes or flying additional routes, the department of justice
answer
Decided there was not enough evidence to charge the airlines with collusion
question
Is there a dominant strategy for Saudi Arabia and, if so, what is it?
answer
Yes, the dominant strategy is to produce a low output
question
Is there a dominant strategy for Ecuador and, if so, what is it?
answer
Yes, the dominant strategy is to produce a high output
question
What is the Nash equilibrium in this game?
answer
In the Nash equilibrium Saudi Arabia produces a low output and earns a profit of $80 million in Ecuador produces a high output and earns a profit of $22 million
question
Which of the following statements is true?
A. The Nash equilibrium is a collusive equilibrium
B. The national equilibrium is a cooperative equilibrium
C. The Nash equilibrium is a non-cooperative, dominant strategy equilibrium
D. There is no Nash equilibrium in this game because each party pursues its dominant strategy
A. The Nash equilibrium is a collusive equilibrium
B. The national equilibrium is a cooperative equilibrium
C. The Nash equilibrium is a non-cooperative, dominant strategy equilibrium
D. There is no Nash equilibrium in this game because each party pursues its dominant strategy
answer
C
question
Prisoners dilemma games imply that cooperative behavior between two people or two firms always breaks down. But reality teaches us that people in firms often cooperate successfully to achieve their goals. Why do the results from prisoners dilemma games fail to predict real world results?
answer
The prisoners dilemma does not apply to most business situations that are repeated over and over
question
Which of the following explains why two firms, Apex and bongo, would engage an implicit collusion, rather than explicit collusion?
answer
Explicit collusion is illegal; if the managers of Apex and bongo engage in implicit collusion, they may be within the law
question
Which of the following is most likely to exert the bargaining power of a buyer?
answer
Walmart, the World's largest discount store, six vendors to supply products made exclusively for its stores
question
In recent years, Amazon has lowered its profits by offering some of its customers free shipping on books and building more warehouses to hold its book inventories. Which of the following explains Amazons actions?
answer
Amazon took these actions to complete more effectively with existing online book sellers
question
Tesla motors manufactures its car is at a plant in Fremont, California. At this plant, Tesla is able to take it vantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had chosen to open its plant in a low wage country such as Mexico, India, or China. And deciding to open the Fremont plant, tesla
answer
Faced a trade off between higher cost and less technical skill
question
The points outside the production possibilities frontier are
answer
unattainable
question
The attainable production points on a production possibilities frontier are
answer
The points along and inside the production possibilities frontier
question
The slope of a production possibilities frontier
answer
measures the opportunity cost of producing one more unit of a good.
question
A movement from X to Y
answer
Could occur because of an influx of immigrant labor
question
A movement from Y to Z
answer
Is the result of advancements in plastic production technology
question
Consider the following events
A. An increase in the unemployment rate
B. A decrease in the nation's money supply
C. A war that kills a significant portion of a nations population
Which of the following events listed above could cause a movement from Y to W?
A. An increase in the unemployment rate
B. A decrease in the nation's money supply
C. A war that kills a significant portion of a nations population
Which of the following events listed above could cause a movement from Y to W?
answer
C only
question
Assume dina's diner only produces sliders and hot wings. The combination of 120 sliders and 100 hot wings would appear
answer
Outside Dina's production possibilities frontier
question
What is the opportunity cost of 1 pound of vegetables?
answer
3/4 pound of meat
question
What is the opportunity cost of 1 pound of meat?
answer
1 1/3 pounds of vegetables
question
Suppose Mendonca is currently producing 60 pounds of vegetables per period. How much meat is also producing, assuming that resources are fully utilized?
answer
75 pounds of meat
question
Which of the following statements is true?
A. Haley has an absolute advantage in making bracelets and Serena is making necklaces
B. Serena has an absolute advantage in making both products
C. Haley has an absolute advantage and making necklaces and Serena is making bracelets
D. Haley has an absolute advantage in making both products
A. Haley has an absolute advantage in making bracelets and Serena is making necklaces
B. Serena has an absolute advantage in making both products
C. Haley has an absolute advantage and making necklaces and Serena is making bracelets
D. Haley has an absolute advantage in making both products
answer
A
question
What is Haleys opportunity cost of making a bracelet?
answer
1 1/3 necklaces
question
What is Haley's opportunity cost of making a necklace?
answer
3/4 of a bracelet
question
Which of the following statements is true?
A. Haley has a comparative advantage in making necklaces and Serena is making bracelets
B. Haley has a comparative advantage in making both products
C. Serena has a comparative advantage in making both products
D. Haley has a comparative advantage in making bracelets and Serena is making necklaces
A. Haley has a comparative advantage in making necklaces and Serena is making bracelets
B. Haley has a comparative advantage in making both products
C. Serena has a comparative advantage in making both products
D. Haley has a comparative advantage in making bracelets and Serena is making necklaces
answer
D
question
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce one bottle of wine for every 25 pounds of cheese produces. Which of the following is true about the comparative advantage between the two countries?
answer
Italy has the comparative advantage in wine
question
What is the opportunity cost of producing 1 gallon of milk in Tahiti?
answer
1.2 gallons of honey
question
What is the opportunity cost of producing 1 gallon of milk in Bora-Bora?
answer
1.5 gallons of honey
question
China has a comparative advantage in the production of
answer
Wheat
question
Honduras has a comparative advantage in the production of
answer
Sailboats
question
If the two countries specialize in trade, who would export motorcycles?
answer
Scotland
question
Eliminating a tariff on running shoes would___businesses that sell running shoes and___consumers who purchased them
answer
Benefits; benefit
question
When Roxanne, a US citizen, purchases a designer dress from Barney's of new York that was made in Milan, the purchase is
answer
The US import an Italian export
question
When BMW, a German company, purchases a welding machine that was made in Toronto, the purchase is
answer
A German import and a Canadian export
question
28 countries in Europe have eliminated all Terrace with each other. This group of countries is known as the
answer
European Union
question
NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?
answer
United States, Canada, and Mexico
question
Select the statement that accurately interpret the data in the table
answer
Sandy's opportunity cost for dog grooming is less than Linda's
question
Select the statement that accurately interpret the data in the table
answer
Sandy has a comparative advantage in dog grooming
question
select the statement that accurately interpret the data in the table
answer
Neither Bryce nor Tina has an absolute advantage in making soap
question
Whenever a buyer and a seller agree to trade,
answer
both must believe they will be made better off
question
A situation in which country does not trade with other countries is called
answer
Autarky
question
The ratio at which a country can trade its exports for imports from other countries is called
answer
terms of trade
question
Which country has an absolute advantage in producing clocks?
answer
Denmark
question
Which country has a comparative advantage in producing clocks?
answer
Denmark
question
With trade, what is the total gain in clock production?
answer
150 clocks
question
Which of the following statements is true?
A. Although some individuals are made better off as a result of international trade, both countries may be worse off overall
B. All individuals in both countries are made better off as a result of international trade
C. Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall
D. Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off
A. Although some individuals are made better off as a result of international trade, both countries may be worse off overall
B. All individuals in both countries are made better off as a result of international trade
C. Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall
D. Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off
answer
D
question
Which of the following is not a source of comparative advantage?
answer
a strong foreign currency exchange rate
question
Japan has developed a comparative advantage in designing and producing automobiles. The source of its comparative advantage in these products is
answer
technology
question
2016, the US trade deficit with China
answer
Had fallen to almost 0
question
Economists study the effect of the China shock on the US economy point out that the firms most hurt by Chinese imports have been
answer
Concentrated in certain states particularly in the Midwest and South East
question
Under autarky, the consumer surplus is
answer
$195
question
Under autarky, the producer surplus is
answer
$105
question
Under autarky, the deadweight loss is
answer
$30
question
Suppose the government allows imports of leather footwear into the United States. What will the market price be?
answer
$18
question
Suppose the government allows imports of leather footwear into the United States. What will be the quantity demanded?
answer
20 units
question
Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?
answer
10 units
question
Suppose the government allows imports of leather footwear into the United States. What will be the quantity of imports?
answer
10 units
question
Suppose the government allows imports of leather footwear into the United States. The market price falls to $18. What is the value of domestic producers surplus?
answer
$40
question
Suppose the government allows imports of leather footwear into the United States. The market price falls to $18. What is the value of consumer surplus?
answer
$320
question
Which of the following is not an example of a trade restriction?
answer
consumer preferences for goods produced domestically
question
Which of the following is the best example of a tariff?
answer
a $150 fee imposed on all imported residential air conditioners
question
Which of the following is the best example of a quota?
answer
a limit on the quantity of tires that can be imported from a foreign country
question
The tariff revenue collected by the government equals the area
answer
E
question
Without tariff in place, the United States consumes
answer
42,000,000 pounds of rice
question
Without the tariff in place, the United States produces
answer
9,000,000 pounds of rice
question
With the tariff in place, the United States consumes
answer
31,000,000 pounds of rice
question
With the tariff in place, the United States produces
answer
15,000,000 pounds of rice
question
With the tariff in place, the United States
answer
imports 16 million pounds of rice
question
As a result of the tariff, domestic producers increase the quantity supplied by
answer
6,000,000 pounds of rice
question
Increase in domestic producers surplus as a result of the tariff is equal to the area
answer
C
question
The tariff causes domestic consumption of rice
answer
To fall by 11,000,000 pounds
question
Lawson domestic consumer surplus as a result of the tariff is equal to the area
answer
C plus D plus E plus F
question
If the tenant was replaced by a quarter which limited rice imports to 16,000,000 pounds, the amount of additional revenue received by Rice importers would equal
answer
$16 million
question
Which of the following is the best example of a voluntary export restraint?
answer
A limit set by the Korean government on the number of cell phones that the United States can import from Korea
question
The open "buy American" provision of the 2009 stimulus package required that stimulus money basement only on US made goods, affectively acting as a quota of zero imports when stimulus money was being spent. In the market for steel, the "buy American" provision would___the price of steel in the United States and___the quantity of steel demanded in the United States
answer
Increase; decrease
question
What is the area of consumer surplus after the imposition of the quota?
answer
A + G + H
question
Without the quota, The domestic price of peanuts equals the world price which is two dollars per pound. What is the quantity of peanuts supplied by domestic producers in the absence of a quota?
answer
10,000,000 pounds
question
In reaction to the passage of the smoot-hawley tariff, Canada as well as many other US trading partners
answer
Enacted large increases in tariffs on US import
question
_____raised average tariff rate by over 50% in the United States in 1930
answer
The smoot-hawley tariff
question
In 1930, the US government attempted to help domestic firms that were harmed by the great depression by
answer
Passing the Smoot-Hawley tariff
question
Free trade____living standards by____economic efficiency.
answer
Raises; increasing
question
Many economists criticize protectionism because it causes losses to consumers and illuminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism?
answer
Supporters of protectionism in high income countries believe that wages will fall is the result of a competition with firms from developing countries
question
Which of the following describes the infant industry argument for protectionism?
answer
Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international market
question
I suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries with a "buy Canadian" provision. This policy, similar to the original "buy American" provision in the 2009 US stimulus bill, is likely to cause
answer
Exporting countries to retaliate by placing trade barriers on their imports from Canada
question
The selling of a product for a price below its cost of production is called
answer
dumping
question
All else equal, if the Trump administration decides to enact protectionist measures, such as a tariff, against foreign solar panels, the price of solar panels in the United States will___and the quantity of solar panels demanded in the United States well___.
answer
Increase; decrease
question
Imposing tariffs in case of dumping
answer
Is allowed under the WTO agreement
question
Measuring the impact of a quota or tariff on the US economy is an example of___. Stating that a quota or tariff should be eliminated as an example of___.
answer
Positive analysis; normative analysis
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