MC Microeconomics Chapters 7-13 Quizzes

An economy is producing at the least-cost rate of production when:
a. marginal revenue is greater than price.
b. marginal cost is greater than average total cost.
c. price and marginal revenue are equal.
d. price and the minimum average total cost are equal.

Cash expenditures a firm makes to pay for resources are called:
a. explicit costs.
b. normal profit.
c. opportunity costs.
d. implicit costs.

Economies and diseconomies of scale explain:
a. why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point.
b. the distinction between fixed and variable costs.
c. why the firm's long-run average total cost curve is U-shaped
d. the profit-maximizing level of production.

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:
a. there must be price fixing by the industry's firms
b. the selling price for this firm is above the market equilibrium price.
c. some existing firms in this market will leave.
d. new firms will enter this market.

Implicit costs are:
a. always greater in the short run than in the long run.
b. "payments" for self-employed resources
c. equal to total fixed costs.
d. comprised entirely of variable costs.

In the long run, pure competition produces:
a. productive efficiency.
b. both productive and allocative efficiency.
c. allocative efficiency.
d. neither productive nor allocative efficiency.

In the short run, output:
a. can vary as the result of changing the size of existing plants and by new firms entering or leaving the industry.
b. can vary as the result of using a fixed amount of plant and equipment more or less intensively.
c. may be altered by varying the size of plant and equipment that now exist in the industry.
d. is absolutely fixed.

In the short run, purely competitive firms earn ______ in equilibrium, while in the long run, firms earn ______ in equilibrium, respectively:
a. normal profits; economic profits
b. profits or losses; profits or losses
c. profits; normal profit
d. profits or losses; normal profit

Productive efficiency refers to:
a. production, where P = MC.
b. cost minimization, where P = minimum ATC.
c. maximizing profits by producing where MR = MC.
d. setting TR = TC.

The main difference between the short run and the long run is that:
a. the long run always refers to a time period of one year or longer.
b. in the long run, only one variable can be fixed.
c. firms earn zero profits in the long run.
d. in the short run, one or more inputs are fixed.

Allocative inefficiency due to unregulated monopoly is characterized by the condition:
a. P=MR
b. P=MC
c. P>AVC
d. P>MC

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by
a. marginal revenue = demand.
b. marginal cost = marginal revenue.
c. marginal cost = demand.
d. average total cost = demand.

Price discrimination refers to:
a. selling a given product for different prices at two different points in time.
b. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
c. the selling of a given product at different prices that do not reflect cost differences.
d. any price above that which is equal to a minimum average total cost.

Which of the following is not a barrier to entry?
a. Economies of scale
b. Patents
c. X-inefficiency
d. Ownership of essential resources

X-inefficiency is said to occur when a firms:
a. marginal costs of producing any output are greater than the minimum possible total costs.
b. total costs of producing any output are greater than the minimum possible average costs.
c. average costs of producing any output are greater than the minimum possible average costs.
d. short-run costs of producing any output are greater than the long-run costs.

An industrial union:
a. organizes workers with similar skills or jobs in an industry.
b. is most effective in a purely competitive industry.
c. organizes skilled and unskilled workers in an industry.
d. is most concerned with decreasing the supply of workers in an industry.

Critics of the minimum wage argue that an increase in the minimum wage rate above the equilibrium rate of a purely competitive labor market would:
a. increase unemployment in the labor market.
b. cause firms to substitute labor for capital.
c. decrease the supply of labor.

Game theory:
a. reveals that mergers between rival firms are self-defeating.
b. is best suited for analyzing purely competitive markets.
c. is the analysis of how people (or firms) behave in strategic situations.
d. reveals that price-fixing among firms reduces profits.

In the long run, new firms will enter a monopolistically competitive industry:
a. until economic profits are zero.
b. provided economies of scale are being realized.
c. even though losses are incurred in the short run.
d. until minimum average total cost is achieved.

In the short run, a profit-maximizing monopolistically competitive firm sets its price:
a. equal to marginal revenue.
b. below marginal cost.
c. above marginal cost.
d. equal to marginal cost.

Nonprice competition refers to:
a. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts.
b. advertising, product promotion, and changes in the real or perceived characteristics of a product.
c. reductions in production costs that are not reflected in price reductions.
d. price increases by a firm that are ignored by its rivals.

The kinked-demand curve of an oligopolist is based on the assumption that:
a. there is no product differentiation.
b. competitors will ignore a price cut but follow a price increase.
c. competitors will follow a price cut but ignore a price increase.
d. competitors will match both price cuts and price increases.

The marginal revenue product of labor is equal to:
a. total revenue divided by the total labor.
b. the unit change in labor divided by the change in total revenue.
c. the change in total revenue multiplied by the unit change in labor.
d. the change in total revenue divided by the unit change in labor.

The measure of the responsiveness of labor quantity to a change in the wage rate is called:
a. elasticity of labor demand.
b. flexibility of labor demand.
c. elasticity of market demand.
d. supply and demand of labor.

The term oligopoly indicates:
a. an industry whose four-firm concentration ratio is low.
b. many producers of a differentiated product.
c. a one-firm industry.
d. a few firms producing either a differentiated or a homogeneous product.

A major distinction between government purchases and government transfer payments is that:
a. government purchases of goods and services have increased more rapidly during the past 20 years than have transfer payments.
b. transfer payments divert resources from private uses to public uses while government purchases do not.
c. government purchases have to be approved by Congress while transfer payments do not.
d. government purchases divert resources from private uses to public uses while transfer payments do not.

Adding the economic activities of government to the circular flow model shows that:
a. government spending creates inflation.
b. government purchases of goods and services, taxes, and transfer payments affect how resources are allocated.
c. The federal government has to borrow funds from households in order to pay salaries to public officials and members of the armed forces.
d. the economic functions of government are shared equally among federal, state, and local governments.

Government programs that pay benefits to those who are unable to earn income because of permanent disabilities or to those who have very low incomes are called:
a. social insurance programs.
b. entitlement programs.
c. affirmative action programs.
d. public assistance programs.

Income mobility:
a. is the movement of wage earners from one job to another.
b. is less in the United States than in most developing nations.
c. makes lifetime income inequality among income receivers in the United States less than income inequality in any single year.
d. reduces the total percentage of households in the lowest quintile of the income distribution over time.

The average tax rate is the:
a. sum of all individual tax rates.
b. tax rate paid by middle-income households.
c. total tax paid divided by a comparison base.
d. increase in taxes as a percentage of an increase in income.

Which of the following is a public assistance or welfare program as opposed to a social insurance program?
a. Supplemental Security Income (SSI)
b. Medicare
c. Unemployment compensation
d. Social Security

Which would be a significant cause of income inequality in the United States?
a. Social Security
b. Housing
c. Discrimination
d. In-kind transfers

The federal governments greatest source of tax revenue is:
a. excise taxes.
b. corporate income taxes.
c. payroll taxes.
d. personal income taxes.

The federal personal income tax is based on the:
a. ability-to-pay principle of taxation.
b. benefits-received principle of taxation.
c. law of comparative advantage.
d. fallacy of limited decisions.

The Lorenz curve portrays:
a. the ratio of labor to capitalist income.
b. income equality.
c. the functional distribution of income.
d. the personal distribution of income.

An excise tax that is applied to imported products that are not produced domestically is a(n):
a. import quota.
b. protective tariff.
c. revenue tariff.
d. nontariff barrier.

If there is no comparative advantage between two countries:
a. the benefits resulting from trade are increased.
b. one country must be more productive in producing all goods than the other.
c. there are no gains from specialization and trade.
d. each country should specialize in the production of a particular commodity.

In a two-nation model, the equilibrium world price will occur where:
a. one nations' export supply curve intersects the other nations import demand curve.
b. exports are exactly twice the level of imports.
c. both nations' import demand curves are vertical
d. both nations' export supply curves are horizontal

In the United States, exports of goods and services account for about what percentage of GDP (total output)?
a. 24 percent
b. 18 percent
c. 13 percent
d. 6 percent

The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the:
a. International Trade Commission (ITC).
b. Common Market Organization (CMO).
c. International Monetary Fund (IMF).
d. World Trade Organization (WTO).