question
Dollars
answer
Which of the following is not an example of a factor of production?
1. A forest
2. A computer program
3. A labor leader
4. Dollars
1. A forest
2. A computer program
3. A labor leader
4. Dollars
question
a scarce resource
answer
A factor of production is the same as:
1. the amount of a good produced
2. the price of a good
3. a profit of a firm
4. an opportunity cost
5. a scarce resource
1. the amount of a good produced
2. the price of a good
3. a profit of a firm
4. an opportunity cost
5. a scarce resource
question
make choices to produce and consume goods and services
answer
Economics is the study of how people:
1. vote for political leaders who decide what is to be produced
2. make choices to produce and consume goods and services
3. establish social institutions that maximize well-being
4. develop value systems that affect their consumption choices
1. vote for political leaders who decide what is to be produced
2. make choices to produce and consume goods and services
3. establish social institutions that maximize well-being
4. develop value systems that affect their consumption choices
question
The reasons for increases in the price of soft drinks
answer
Which of the following is the best example of a microeconomic topic?
1. The impact that the money supply has on inflation
2. The reasons for increases in the price of soft drinks
3. The effect that federal budget deficits have on the interest rate
4. The tradeoff between inflation and unemployment
1. The impact that the money supply has on inflation
2. The reasons for increases in the price of soft drinks
3. The effect that federal budget deficits have on the interest rate
4. The tradeoff between inflation and unemployment
question
how does Microsoft price its software packages
answer
Macroeconomics deals with the analysis of all of the following questions except:
1. why do national economies grow
2. what determines a nation's savings and investments
3. how does a central bank influence inflation
4. why does a country experience recessions
5. how does Microsoft price its software packages
1. why do national economies grow
2. what determines a nation's savings and investments
3. how does a central bank influence inflation
4. why does a country experience recessions
5. how does Microsoft price its software packages
question
simplified description of reality to understand and predict an economic event
answer
A model is defined as a
1. description of all variables affecting a situation
2. positive analysis of all variables affecting an event
3. simplified description of reality to understand and predict an economic event
4. prediction based on historical evidence
1. description of all variables affecting a situation
2. positive analysis of all variables affecting an event
3. simplified description of reality to understand and predict an economic event
4. prediction based on historical evidence
question
other relevant factors like consumer incomes must be held constant
answer
An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, ceteris paribus. The phrase "ceteris paribus" means that
1. other relevant factors like consumer incomes must be held constant
2. the gasoline prices must first be adjusted for inflation
3. the theory is widely accepted but cannot be accurately tested
4. consumers' need for gasoline remains the same regardless of the price
1. other relevant factors like consumer incomes must be held constant
2. the gasoline prices must first be adjusted for inflation
3. the theory is widely accepted but cannot be accurately tested
4. consumers' need for gasoline remains the same regardless of the price
question
If taxes are over 50 percent of national income, job creation falls
answer
Which of the following is a statement of positive economics?
1. Too much government spending is the biggest problem facing the U.S. economy
2. Creating jobs is the most serious problem facing the U.S. economy
3. Raising taxes provides additional revenue that should be used to finance health care
4. If taxes are over 50 percent of national income, job creation falls
1. Too much government spending is the biggest problem facing the U.S. economy
2. Creating jobs is the most serious problem facing the U.S. economy
3. Raising taxes provides additional revenue that should be used to finance health care
4. If taxes are over 50 percent of national income, job creation falls
question
a statement of opinion which advocates a particular position
answer
A normative economic statement is
1. a statement of fact
2. a statement of opinion which advocates a particular position
3. not acceptable in the economics profession
4. the only acceptable manner to present economic information
5. a statement based upon government-supplied information
1. a statement of fact
2. a statement of opinion which advocates a particular position
3. not acceptable in the economics profession
4. the only acceptable manner to present economic information
5. a statement based upon government-supplied information
question
can never be fully satisfied
answer
Human wants
1. are unfilled only in the poorer countries of the world
2. can be completely satisfied by advancing technology
3. can never be fully satisfied
4. only apply to necessities
5. exist only if we are selfish
1. are unfilled only in the poorer countries of the world
2. can be completely satisfied by advancing technology
3. can never be fully satisfied
4. only apply to necessities
5. exist only if we are selfish
question
Traditional economy
answer
Which of the following economic systems answers the basic economic questions by copying the previous generation?
1. Traditional economy
2. Command economy
3. Market economy
4. Capitalism
1. Traditional economy
2. Command economy
3. Market economy
4. Capitalism
question
central authority
answer
In a command economy, the basic economic questions are answered by
1. central authority
2. individual buyers and sellers
3. the traditional methods
4. none of the above
1. central authority
2. individual buyers and sellers
3. the traditional methods
4. none of the above
question
the "invisible hand" of the price system
answer
In Adam Smith's competitive market economy, the question of what goods to produce is determined by:
1. the "invisible hand" of the price system
2. businesses
3. unions
4. the government, through laws and regulations
1. the "invisible hand" of the price system
2. businesses
3. unions
4. the government, through laws and regulations
question
along their production possibilities curve
answer
Without trade, the consumption possibilities for two nations are:
1. outside their production possibilities curve
2. inside their production possibilities curve
3. along their production possibilities curve
4. at a point equal to the world production possibilities curve
1. outside their production possibilities curve
2. inside their production possibilities curve
3. along their production possibilities curve
4. at a point equal to the world production possibilities curve
question
production possibilities equal its consumption possibilities
answer
If a nation follows a policy of being self‑sufficient, its
1. production possibilities equal its consumption possibilities
2. consumption possibilities are greater than its production possibilities
3. production possibilities curve shifts rightward
4. consumption possibilities are less than its production possibilities
1. production possibilities equal its consumption possibilities
2. consumption possibilities are greater than its production possibilities
3. production possibilities curve shifts rightward
4. consumption possibilities are less than its production possibilities
question
consumption possibilities
answer
Specialization and trade allow an economy to expand its
1. production possibilities
2. consumption possibilities
3. technological advantage
4. absolute advantage
1. production possibilities
2. consumption possibilities
3. technological advantage
4. absolute advantage
question
comparative advantage
answer
A nation should specialize in the production of the product for which it has a(n):
1. absolute advantage
2. exchange rate
3. specialization
4. comparative advantage
5. terms of trade
1. absolute advantage
2. exchange rate
3. specialization
4. comparative advantage
5. terms of trade
question
total output will be highest if Japan specializes in rice and the United States specializes in bicycles
answer
If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then
1. the opportunity cost of producing bicycles in the United States is higher than in Japan
2. Japan has a comparative advantage in the production of bicycles
3. the United States has an absolute advantage in the production of rice
4. total output will be highest if the United States specializes in rice and Japan specializes in bicycles.
5. total output will be highest if Japan specializes in rice and the United States specializes in bicycles
1. the opportunity cost of producing bicycles in the United States is higher than in Japan
2. Japan has a comparative advantage in the production of bicycles
3. the United States has an absolute advantage in the production of rice
4. total output will be highest if the United States specializes in rice and Japan specializes in bicycles.
5. total output will be highest if Japan specializes in rice and the United States specializes in bicycles
question
India uses fewer resources to produce rugs than England
answer
If India has an absolute advantage in rug production when compared to England, then
1. India should export rugs to England
2. England should export rugs to India
3. international trade should not occur
4. England uses fewer resources to produce rugs than India
5 . India uses fewer resources to produce rugs than England
1. India should export rugs to England
2. England should export rugs to India
3. international trade should not occur
4. England uses fewer resources to produce rugs than India
5 . India uses fewer resources to produce rugs than England
question
All of the above
answer
Because of the problem of scarcity, each economic system must make which of the following choices?
1. How to produce?
2. What to produce?
3. For whom to produce?
4. All of the above
1. How to produce?
2. What to produce?
3. For whom to produce?
4. All of the above
question
opportunity cost
answer
A good or service that is forgone by choosing one alternative over another is called a (an)
1. explicit cost
2. opportunity cost
3. historical cost
4. accounting cost.
1. explicit cost
2. opportunity cost
3. historical cost
4. accounting cost.
question
the best alternative that was sacrificed
answer
The opportunity cost of an economic decision is:
1. the best alternative that was sacrificed
2. the amount of money needed to implement the decision
3. any land, labor, and capital that are wasted
4. all options that were lost due to scarcity
1. the best alternative that was sacrificed
2. the amount of money needed to implement the decision
3. any land, labor, and capital that are wasted
4. all options that were lost due to scarcity
question
outweighs the extra cost
answer
According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study
1. is positive
2. outweighs the extra cost
3. exceeds the benefits of the previous hour of study
4. will raise your exam score
1. is positive
2. outweighs the extra cost
3. exceeds the benefits of the previous hour of study
4. will raise your exam score
question
efficient
answer
All points on the production possibilities curve are:
1. unattainable
2. fair
3. efficient
4. optimal
1. unattainable
2. fair
3. efficient
4. optimal
question
economy B will grow faster than economy A
answer
Compare two economies A and B that start out with identical production possibilities curves.
Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict
1. economy A will operate inefficiently
2. economy B will operate inefficiently
3. economy A and economy B will grow equally fast
4. economy A will grow faster than economy B
5. economy B will grow faster than economy A
Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict
1. economy A will operate inefficiently
2. economy B will operate inefficiently
3. economy A and economy B will grow equally fast
4. economy A will grow faster than economy B
5. economy B will grow faster than economy A
question
inversely related
answer
The law of demand states that, ceteris paribus, price and quantity demanded are:
1. directly related
2. inversely related
3. uniformly related
4. horizontally related
1. directly related
2. inversely related
3. uniformly related
4. horizontally related
question
a market demand curve
answer
The horizontal summation of individual demand curves gives
1. a supply curve
2. a Phillips curve
3. a market demand curve
4. the quantity supplied
5. a production function
1. a supply curve
2. a Phillips curve
3. a market demand curve
4. the quantity supplied
5. a production function
question
upward movement to the left along the demand curve
answer
A decrease in quantity demanded is given by a(n):
1. downward shift of the demand curve
2. upward shift of the demand curve
3. downward movement to the right along the demand curve
4. upward movement to the left along the demand curve
5. downward shift of both demand and supply curves
1. downward shift of the demand curve
2. upward shift of the demand curve
3. downward movement to the right along the demand curve
4. upward movement to the left along the demand curve
5. downward shift of both demand and supply curves
question
quantity demanded
answer
Ceteris paribus, a change in the price of a good always results in a change in
1. income
2. tastes
3. quantity demanded
4. both income and tastes
5. the price of other goods
1. income
2. tastes
3. quantity demanded
4. both income and tastes
5. the price of other goods
question
An upward movement along the demand curve for coffee
answer
Which of the following best represents the effects of an increase in the price of coffee, other things being equal?
1. A leftward shift in the demand curve for coffee
2. A downward movement along the demand curve for coffee
3. A rightward shift in the demand curve for coffee
4. An upward movement along the demand curve for coffee
1. A leftward shift in the demand curve for coffee
2. A downward movement along the demand curve for coffee
3. A rightward shift in the demand curve for coffee
4. An upward movement along the demand curve for coffee
question
A change in the price of good X
answer
Which of the following will not cause a shift in the demand curve for good X?
1. A change in the price of a complementary good
2. A change in the price of good X
3. A change in consumer tastes and preferences for good X
4. An increase in consumer income
1. A change in the price of a complementary good
2. A change in the price of good X
3. A change in consumer tastes and preferences for good X
4. An increase in consumer income
question
could be caused by an increase in the price of a substitute good
answer
An increase in demand
results in a leftward shift of the demand curve
1. results in a leftward shift of the demand curve
2. could be caused by a decrease in the price of the good
3. could be caused by an increase in the price of a substitute good
4. is shown as movement down along a demand curve
results in a leftward shift of the demand curve
1. results in a leftward shift of the demand curve
2. could be caused by a decrease in the price of the good
3. could be caused by an increase in the price of a substitute good
4. is shown as movement down along a demand curve
question
decrease in the price of one product will cause a decrease in the demand for the other product
answer
If two goods are substitutes in consumption, a(n):
1. decrease in the price of one product will cause an increase in the demand for the other product
2. decrease in the price of one product will cause a decrease in the demand for the other product
3. increase in the price of one product will cause an increase in the supply of the other product
4. increase in the price of one product will cause a decrease in the supply of the other product
5. increase in the price of one product will cause a decrease in the demand for the other product
1. decrease in the price of one product will cause an increase in the demand for the other product
2. decrease in the price of one product will cause a decrease in the demand for the other product
3. increase in the price of one product will cause an increase in the supply of the other product
4. increase in the price of one product will cause a decrease in the supply of the other product
5. increase in the price of one product will cause a decrease in the demand for the other product
question
decrease in the demand for oil.
answer
Assuming gasoline and oil to be complementary goods, the effect on the oil market of an increase in the price of gasoline (other things being equal) would best be described as a (an):
1. increase in the demand for oil
2. decrease in the demand for oil.
3. increase in the quantity of oil demanded
4. increase in the quantity of oil demanded
1. increase in the demand for oil
2. decrease in the demand for oil.
3. increase in the quantity of oil demanded
4. increase in the quantity of oil demanded
question
increase the demand for dry cleaning
answer
Assuming that dry cleaning is a normal good, an increase in consumer income, other things being equal, will
1. increase the demand for dry cleaning
2. decrease the demand for dry cleaning
3. increase the quantity demanded of dry cleaning
4. decrease the quantity of dry cleaning demanded
1. increase the demand for dry cleaning
2. decrease the demand for dry cleaning
3. increase the quantity demanded of dry cleaning
4. decrease the quantity of dry cleaning demanded
question
leftward shift in the demand curve for bus travel
answer
Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause a (an
1. upward movement along the demand curve for bus travel
2. downward movement along the demand curve for bus travel
3. rightward shift in the demand curve for bus travel
4. leftward shift in the demand curve for bus travel
1. upward movement along the demand curve for bus travel
2. downward movement along the demand curve for bus travel
3. rightward shift in the demand curve for bus travel
4. leftward shift in the demand curve for bus travel
question
rising prices provide producers with a greater profit incentive
answer
In general, supply curves slope upward because
1. increases in the price of a good result in lower opportunity costs
2. rising prices provide producers with a greater profit incentive
3. consumers buy a greater quantity
4. technology improves the ability of firms to produce more at each possible price
1. increases in the price of a good result in lower opportunity costs
2. rising prices provide producers with a greater profit incentive
3. consumers buy a greater quantity
4. technology improves the ability of firms to produce more at each possible price
question
there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers
answer
The law of supply states that
1. there is a negative relationship between the price of a good and the quantity of it purchased by suppliers
2. there is a positive relationship between the price of a good and the quantity that buyers choose to purchase
3. there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers
4. at a lower price, a greater quantity will be supplied
1. there is a negative relationship between the price of a good and the quantity of it purchased by suppliers
2. there is a positive relationship between the price of a good and the quantity that buyers choose to purchase
3. there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers
4. at a lower price, a greater quantity will be supplied
question
Changes in the market price of a good, other things held constant
answer
Which of the following will cause a movement along the supply curve?
1. An increase or decrease in the raw materials costs
2. An increase in labor costs
3. Changes in the cost of the machinery used to make a good
4. Changes in the market price of a good, other things held constant
1. An increase or decrease in the raw materials costs
2. An increase in labor costs
3. Changes in the cost of the machinery used to make a good
4. Changes in the market price of a good, other things held constant
question
rightward shift of the supply curve for cigarettes
answer
If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will fall. This fall in prices can be attributed a (an):
1. upward movement along the supply curve for cigarettes
2. rightward shift of the supply curve for cigarettes
3. downward movement along the demand curve for cigarettes
4. leftward shift of the supply curve for cigarettes
1. upward movement along the supply curve for cigarettes
2. rightward shift of the supply curve for cigarettes
3. downward movement along the demand curve for cigarettes
4. leftward shift of the supply curve for cigarettes
question
Encourage farmers to produce less milk.
answer
If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?
1. Take milk from government storage and sell it
2. Encourage farmers to produce more milk
3. Subsidize purchases of dairy equipment
4. Encourage farmers to produce less milk.
1. Take milk from government storage and sell it
2. Encourage farmers to produce more milk
3. Subsidize purchases of dairy equipment
4. Encourage farmers to produce less milk.
question
Price will increase, and quantity will decrease
answer
An increase in the wages paid to fishermen will have what effect on the fish market equilibrium?
1. Price will decrease, and quantity will decrease
2. Price will increase, and quantity will increase
3. Price will decrease, and quantity will increase
4. Price will increase, and quantity will decrease
5. Price and quantity will stay the same
1. Price will decrease, and quantity will decrease
2. Price will increase, and quantity will increase
3. Price will decrease, and quantity will increase
4. Price will increase, and quantity will decrease
5. Price and quantity will stay the same
question
equilibrium
answer
If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result will be a (an):
1. surplus
2. shortage
3. depletion of inventories
4. equilibrium
1. surplus
2. shortage
3. depletion of inventories
4. equilibrium
question
surplus
answer
If the equilibrium price of aspirins is $2.50 and a price floor is imposed at $3.00, the eventual result will be a (an):
1. surplus
2. shortage
3. equilibrium
1. surplus
2. shortage
3. equilibrium
question
shortages
answer
Price ceilings set below the equilibrium create
1. externalities
2. unemployment
3. shortages
4. surpluses
1. externalities
2. unemployment
3. shortages
4. surpluses
question
all of the above
answer
Which of the following is an example of market failure?
1.Public goods
2. Externalities
3. Lack of competition
4. all of the above
1.Public goods
2. Externalities
3. Lack of competition
4. all of the above
question
externality
answer
A cost or benefit of a good imposed on people other than the consumers or producer of a good is called a (an):
1.public good
2. merit good
3. private good
4. externality
1.public good
2. merit good
3. private good
4. externality
question
receives benefits from someone else's action but does not pay for them
answer
A free rider is a person who
1. is harmed by another's actions
2. is subject to a negative externality
3. receives benefits from someone else's action but does not pay for them
4. pays less than the full value for a product
5. won the state lottery
1. is harmed by another's actions
2. is subject to a negative externality
3. receives benefits from someone else's action but does not pay for them
4. pays less than the full value for a product
5. won the state lottery
question
their benefits cannot be denied to anyone
answer
Public goods differ from private goods in that
1. they produce negative externalities
2. they are not scarce
3. their benefits cannot be denied to anyone
4. their consumption must be
regulated by the government
1. they produce negative externalities
2. they are not scarce
3. their benefits cannot be denied to anyone
4. their consumption must be
regulated by the government
question
the economic activity of others
answer
Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from
1. poor planning
2. intentional damages
3. excessive costs
4. the economic activity of others
1. poor planning
2. intentional damages
3. excessive costs
4. the economic activity of others
question
percentage change in the quantity demanded of a good to a percentage change in its price
answer
Price elasticity of demand refers to the ratio of the
1. percentage change in price of a good in response to a percentage change in quantity demanded
2. percentage change in price of a good to a percentage increase in income
3. percentage change in the quantity demanded of a good to a percentage change in its price
4. none of the above
1. percentage change in price of a good in response to a percentage change in quantity demanded
2. percentage change in price of a good to a percentage increase in income
3. percentage change in the quantity demanded of a good to a percentage change in its price
4. none of the above
question
an increase in total revenue
answer
If demand is price elastic, a decrease in price causes
1. an increase in total revenue
2. a decrease in total revenue
3. no change in total revenue
4. an increase in quantity, but anything can happen to revenue
1. an increase in total revenue
2. a decrease in total revenue
3. no change in total revenue
4. an increase in quantity, but anything can happen to revenue
question
infinity
answer
A perfectly elastic demand curve has an elasticity coefficient of
1. 0
2. 1
3. less than 1
4. infinity
1. 0
2. 1
3. less than 1
4. infinity
question
0.80
answer
Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?
1. 0.25
2. 0.50
3. 0.80
4. 1.25
1. 0.25
2. 0.50
3. 0.80
4. 1.25
question
inelastic
answer
If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is
1. elastic
2. inelastic
3. perfectly inelastic
4. unitary elastic
1. elastic
2. inelastic
3. perfectly inelastic
4. unitary elastic
question
elastic
answer
If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is
1. elastic
2. inelastic
3. perfectly inelastic
4. perfectly elastic
1. elastic
2. inelastic
3. perfectly inelastic
4. perfectly elastic
question
unitary elastic
answer
If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is:
1. elastic
2. inelastic
3. perfectly elastic
4. unitary elastic
1. elastic
2. inelastic
3. perfectly elastic
4. unitary elastic
question
unitary elastic
answer
Suppose Good Food's supermarket raises the price of its steak and finds its total revenue from steak sales does not change. This is evidence that price elasticity of demand for steak is
1. perfectly elastic
2. perfectly inelastic
3. unitary elastic
4. inelastic
5. elastic
1. perfectly elastic
2. perfectly inelastic
3. unitary elastic
4. inelastic
5. elastic
question
perfectly inelastic
answer
The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is
1. perfectly elastic
2. perfectly inelastic
3. unitary elastic
4. elastic
5. inelastic
1. perfectly elastic
2. perfectly inelastic
3. unitary elastic
4. elastic
5. inelastic
question
product B is more price elastic than product A
answer
If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then
1. product A is more price elastic than product B
2. product B is more price elastic than product A
3. consumers are more sensitive to price changes in product A than in product B
4. product B is more price inelastic than product A
5. products A and B must be substitutes
1. product A is more price elastic than product B
2. product B is more price elastic than product A
3. consumers are more sensitive to price changes in product A than in product B
4. product B is more price inelastic than product A
5. products A and B must be substitutes
question
buy 2 percent more of the product in response to a 1 percent drop in price
answer
If demand price elasticity measures ,
1. this implies that consumers would
buy twice as much of the product if the price drops 10 percent
2. require a 2 percent drop in price to increase their purchases by 1 percent
require a 2 percent drop in price to increase their purchases by 1 percent
3. buy 2 percent more of the product in response to a 1 percent drop in price
4. require at least a $2 increase in price before showing any response to the price increase
1. this implies that consumers would
buy twice as much of the product if the price drops 10 percent
2. require a 2 percent drop in price to increase their purchases by 1 percent
require a 2 percent drop in price to increase their purchases by 1 percent
3. buy 2 percent more of the product in response to a 1 percent drop in price
4. require at least a $2 increase in price before showing any response to the price increase
question
price elastic
answer
If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is
1. price inelastic
2. price elastic
3. unit elastic
4. cross elastic
5. income inelastic
1. price inelastic
2. price elastic
3. unit elastic
4. cross elastic
5. income inelastic
question
the less the essential nature of the good
answer
A product would be more demand price elastic
1. the shorter the time the consumer has to adjust to price changes
2. the lower the price of the good
3. the fewer the number of good substitutes
4. the less the essential nature of the good
1. the shorter the time the consumer has to adjust to price changes
2. the lower the price of the good
3. the fewer the number of good substitutes
4. the less the essential nature of the good
question
1.33
answer
A study of consumers in an area found that as family income increased from $25,000 per year to $35, 000 per year, other factors held constant, the number of houses purchased increased from 7,000 per year to 11,000 per year. This finding indicates an income elasticity of demand coefficient for housing over this family income range of
1. 0.22
2. 0.75
3. 1.33
4. 4.50
1. 0.22
2. 0.75
3. 1.33
4. 4.50
question
Normal good
answer
If the income elasticity of demand for a good is .59, then it is what type of good?
1. Price elastic
2. Price inelastic
3. Normal good
4. Income elastic
5. Inferior good
1. Price elastic
2. Price inelastic
3. Normal good
4. Income elastic
5. Inferior good
question
be negative
answer
The cross elasticity of demand for complementary products must
1. be greater than one
2. be less than one
3. be zero
4. be negative
1. be greater than one
2. be less than one
3. be zero
4. be negative
question
substitutes.
answer
The cross elasticity between two goods is 2.5. These goods are
1. perfect complements
2. imperfect complements
3. substitutes.
4. inferior
1. perfect complements
2. imperfect complements
3. substitutes.
4. inferior
question
flat (elastic) demand curve and a steep (inelastic) supply curve
answer
If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a
1. flat (elastic) demand curve and a steep (inelastic) supply curve
2. steep (inelastic) demand curve and a flat (elastic) supply curve
3. steep (inelastic) demand curve and steep (inelastic) demand curve
4. flat (elastic) demand curve and a flat (elastic) supply curve
1. flat (elastic) demand curve and a steep (inelastic) supply curve
2. steep (inelastic) demand curve and a flat (elastic) supply curve
3. steep (inelastic) demand curve and steep (inelastic) demand curve
4. flat (elastic) demand curve and a flat (elastic) supply curve
question
Utility
answer
What term do economists use to refer to the satisfaction that an individual expects to receive from consuming a good or service?
1. Utility
2. Response
3. Usability
4. Demand
5. Desirable
1. Utility
2. Response
3. Usability
4. Demand
5. Desirable
question
the extra satisfaction a person derives from consuming an additional unit of a good
answer
Marginal utility is defined as
the extra satisfaction the consumer
1. receives from an extra $1 of income
the extra satisfaction the consumer
2. the total level of satisfaction a consumer receives upon the consumption of a certain number of goods
3. the number of hours a consumer would be willing to work to receive a certain product
4. the extra satisfaction a person derives from consuming an additional unit of a good
the extra satisfaction the consumer
1. receives from an extra $1 of income
the extra satisfaction the consumer
2. the total level of satisfaction a consumer receives upon the consumption of a certain number of goods
3. the number of hours a consumer would be willing to work to receive a certain product
4. the extra satisfaction a person derives from consuming an additional unit of a good
question
marginal utility per dollar's worth of two goods is the same for the last dollar spent on each good
answer
A state of consumer equilibrium for two goods consumed exists when the:
1. marginal utility of all goods is the same for the last dollar spent on each good
2. marginal utility per dollar's worth of two goods is the same for the last dollar spent on each good
3. price of two goods is the same for the last dollar spent on each good
4. marginal cost per dollar spent on two goods is the same
1. marginal utility of all goods is the same for the last dollar spent on each good
2. marginal utility per dollar's worth of two goods is the same for the last dollar spent on each good
3. price of two goods is the same for the last dollar spent on each good
4. marginal cost per dollar spent on two goods is the same
question
more of X and less of Y
answer
Assume a consumer purchases a combination of goods X and Y such that MUx / Px = 20 units of utility per dollar and MUy / Py = 10 units of utility per dollar. To maximize utility, the consumers should buy:
1. neither X nor Y
2. less of both X and Y
3. more of both X and Y
4. more of X and less of Y
5. less of X and more of Y
1. neither X nor Y
2. less of both X and Y
3. more of both X and Y
4. more of X and less of Y
5. less of X and more of Y
question
should increase his/her purchases of B and decrease the purchases of A
answer
Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MUa = 15 and MUb = 80, and the Pa = $5 and the Pb = $20. Then the consumer
1. is maximizing his/her utility
2. should increase his/her purchases of B and decrease the purchases of A
3. should spend more money on both goods
4. should spend less money on both goods
1. is maximizing his/her utility
2. should increase his/her purchases of B and decrease the purchases of A
3. should spend more money on both goods
4. should spend less money on both goods
question
$0
answer
A firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10 percent interest rate per year. The firm's economic profit is
1. $400 million
2. $100 million
3. $80 million
4. $0
1. $400 million
2. $100 million
3. $80 million
4. $0
question
$10 million
answer
Suppose a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $20 million. This firm's accounting profit is:
1. $80 million
2. $70 million
3. $10 million
4. ‑$10 million
1. $80 million
2. $70 million
3. $10 million
4. ‑$10 million
question
during which the firm can vary all inputs including its plant size
answer
The long run is a planning period
1. during which the firm can vary all inputs including its plant size
2. less than six months
3. less than one year
4. less than five years
1. during which the firm can vary all inputs including its plant size
2. less than six months
3. less than one year
4. less than five years
question
falls
answer
Long‑run economies of scale exist when the long‑run average cost curve:
1. rises
2. remains constant
3. falls
4. does not exist
1. rises
2. remains constant
3. falls
4. does not exist
question
neither rising or falling
answer
Constant returns to scale exist when the long‑run average cost is
1. neither rising or falling
2. falling
3. rising
1. neither rising or falling
2. falling
3. rising
question
firms selling a homogeneous product
answer
Perfectly competitive markets are characterized by
1. a small number of very large producers
2. very strong barriers to entry and exit
3. firms selling a homogeneous product
4. all of the above
1. a small number of very large producers
2. very strong barriers to entry and exit
3. firms selling a homogeneous product
4. all of the above
question
perfectly elastic
answer
Because a competitive firm is a price taker, it faces a demand curve that is:
1. perfectly inelastic
2. perfectly elastic
3. relatively inelastic
4. relatively elastic
1. perfectly inelastic
2. perfectly elastic
3. relatively inelastic
4. relatively elastic
question
all of the above
answer
A perfectly competitive firm in the short‑run maximizes its profit by producing the output where
1. marginal cost equals price
2. marginal cost equals marginal revenue
3. total revenue minus total cost is at a maximum
4. all of the above
1. marginal cost equals price
2. marginal cost equals marginal revenue
3. total revenue minus total cost is at a maximum
4. all of the above
question
is making a mistake and should shut down
answer
Consider a firm with the following cost and revenue information: ATC = $8, AVC = $7, and MR = MC = $6. If the firm produces Q = 60 in the short run, it:
1. is minimizing losses
2. makes a total loss of $60
3. should produce more output
4. is making a mistake and should shut down
1. is minimizing losses
2. makes a total loss of $60
3. should produce more output
4. is making a mistake and should shut down
question
P = MIN ATC
answer
Define productively efficient:
1. P = MIN ATC
2. P = ATC
3. ATC = MC
4. MC= MR
1. P = MIN ATC
2. P = ATC
3. ATC = MC
4. MC= MR
question
P = MC
answer
Define Allocatively Efficient:
1. P = MIN ATC
2. P = ATC
3. P = AVC
4. P = MC
1. P = MIN ATC
2. P = ATC
3. P = AVC
4. P = MC
question
0
answer
A perfectly competitive market will earn what type of long run profit?
1. 0
2. positive
3. negative
4. uncetain
1. 0
2. positive
3. negative
4. uncetain
question
Entry and exit of firms
answer
What is the main reason profits levels are what they are in the long run for a perfect competitor?
1. Entry and exit of firms
2. Uncertain
3. Price competition
4. metal interdependence
1. Entry and exit of firms
2. Uncertain
3. Price competition
4. metal interdependence
question
MIN AVC and moves along the MC curve
answer
In perfect completion, the firm's supply curve begins where?
1. MIN AVC and moves along the MC curve
2. MIN ATC and moves along the MC curve
3. MIN AVC and moves along the Demand curve
4. IN ATC and moves along the MR curve
1. MIN AVC and moves along the MC curve
2. MIN ATC and moves along the MC curve
3. MIN AVC and moves along the Demand curve
4. IN ATC and moves along the MR curve
question
Minimum point on the long-run average cost curve
answer
In long-run equilibrium for a perfectly competitive firm, price equals which of the following?
1. Economies of real cost
2. Maximum total revenue.
3. Diseconomies of scale cost
4. Minimum point on the long-run
5. average cost curve
1. Economies of real cost
2. Maximum total revenue.
3. Diseconomies of scale cost
4. Minimum point on the long-run
5. average cost curve
question
single firm that is not a price taker
answer
Monopoly is a market structure characterized by a
1. single firm operating as a price taker
2. few firms operating as price takers
3. single firm that is not a price taker
4. none of the above
1. single firm operating as a price taker
2. few firms operating as price takers
3. single firm that is not a price taker
4. none of the above
question
all of the above
answer
A monopolized market is characterized by
1. a sole seller of a product for which there are few suitable substitutes
2. very strong barriers to entry
3. a single firm facing the market demand curve
4. all of the above
1. a sole seller of a product for which there are few suitable substitutes
2. very strong barriers to entry
3. a single firm facing the market demand curve
4. all of the above
question
identical to the market demand curve
answer
The monopolist's demand curve is
identical to the market demand curve
1. identical to the market demand curve
2. identical to the marginal revenue curve
3. below the marginal revenue curve
4. a horizontal line at the market price
identical to the market demand curve
1. identical to the market demand curve
2. identical to the marginal revenue curve
3. below the marginal revenue curve
4. a horizontal line at the market price
question
Economies of scale
answer
Which barrier to entry results in the creation of a natural monopoly?
1. Legal barriers like government franchises
2. Economies of scale
3. Ownership of a vital resource
4. Patents and copyrights
1. Legal barriers like government franchises
2. Economies of scale
3. Ownership of a vital resource
4. Patents and copyrights
question
equal to 1
answer
When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is
1. greater than 1
2. equal to 1
3. less than 2
4. equal to 0
1. greater than 1
2. equal to 1
3. less than 2
4. equal to 0
question
elastic, but not perfectly elastic
answer
At any point where a monopolist's marginal revenue is positive, the downward-sloping straight-line demand curve is:
1. perfectly elastic
2. elastic, but not perfectly elastic
3. unit elastic
4. inelastic
1. perfectly elastic
2. elastic, but not perfectly elastic
3. unit elastic
4. inelastic
question
below market price
answer
For a monopolist, marginal revenue is always
1. below market price
2. equal to market price
3. greater than market price
4. equal to total revenue
1. below market price
2. equal to market price
3. greater than market price
4. equal to total revenue
question
P = MC
answer
If a monopoly is regulated under Marginal Costs Pricing, you would find the output by finding where
1. P = MC
2. P = ATC
3. MR=MC
4. P = MIN ATC
1. P = MC
2. P = ATC
3. MR=MC
4. P = MIN ATC
question
ATC hits the demand curve
answer
If a monopoly is regulated under FAIR RETURN Pricing, you would find the output by finding where
1. ATC hits the demand curve
2. P = MC
3. MR= MC
4. AVC hits the demand curve
1. ATC hits the demand curve
2. P = MC
3. MR= MC
4. AVC hits the demand curve
question
many firms and differentiated products
answer
The monopolistic competition market structure is characterized by
1. few firms and similar products
2. many firms and differentiated products
3. many firms and a homogeneous product
4. few firms and a homogeneous product
1. few firms and similar products
2. many firms and differentiated products
3. many firms and a homogeneous product
4. few firms and a homogeneous product
question
more elastic than for a monopoly
answer
Product differentiation makes the demand for a monopolistically competitive firm's product:
1. perfectly elastic
2. more elastic than for a monopoly
3. more inelastic than for a monopoly
4. perfectly inelastic
1. perfectly elastic
2. more elastic than for a monopoly
3. more inelastic than for a monopoly
4. perfectly inelastic
question
produce the output level at which price equals long-run average cost
answer
The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will
1. produce the output level at which price equals long-run marginal cost
2. operate at minimum long-run average cost
3. overutilize its insufficient capacity
4. produce the output level at which price equals long-run average cost
1. produce the output level at which price equals long-run marginal cost
2. operate at minimum long-run average cost
3. overutilize its insufficient capacity
4. produce the output level at which price equals long-run average cost
question
zero pure economic profits
answer
Monopolistic competitive firms in the long run earn:
1. positive economic profits
2. zero pure economic profits
3. negative economic profits
4. none of the above
1. positive economic profits
2. zero pure economic profits
3. negative economic profits
4. none of the above
question
the producer charges a price greater than $3
answer
Costume jewelry is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that
1. the producer is charging a price of $3
2. economic profit is $2,100
3. the producer charges a price greater than $3
4. new firms will want to enter
1. the producer is charging a price of $3
2. economic profit is $2,100
3. the producer charges a price greater than $3
4. new firms will want to enter
question
there are few firms selling either a homogeneous or differentiated product
answer
An oligopoly is a market structure in which
1. one firm has 100 percent of a market
2. there are many small firms
3. there are many firms with no control over price
4. there are few firms selling either a homogeneous or differentiated product
1. one firm has 100 percent of a market
2. there are many small firms
3. there are many firms with no control over price
4. there are few firms selling either a homogeneous or differentiated product
question
mutual interdependence in pricing decisions
answer
A characteristic of an oligopoly is
1. mutual interdependence in pricing decisions
2. independent pricing decisions
3. lack of control over prices
4. none of the above
1. mutual interdependence in pricing decisions
2. independent pricing decisions
3. lack of control over prices
4. none of the above
question
all of the above
answer
An oligopoly
1. and monopolistically competitive market produce less and charge higher prices than if their markets were perfectly competitive
2. is characterized by mutual interdependence of pricing decisions
3. may be characterized by a kinked demand curve
4. all of the above
1. and monopolistically competitive market produce less and charge higher prices than if their markets were perfectly competitive
2. is characterized by mutual interdependence of pricing decisions
3. may be characterized by a kinked demand curve
4. all of the above
question
following price reductions but not price increases
answer
A "kinked" demand curve reflects a tendency on the part of an oligopolist to
1. follow price increases but not price reductions
2. following price reductions but not price increases
3. be unconcerned with rivals' behavior
4. None of the above
1. follow price increases but not price reductions
2. following price reductions but not price increases
3. be unconcerned with rivals' behavior
4. None of the above
question
decreases
answer
An oligopolist operating with a kinked demand curve would expect rivals to match its price
1. increases
2. decreases.,
3. both a and b
4. neither a nor b
1. increases
2. decreases.,
3. both a and b
4. neither a nor b
question
price times marginal product
answer
For a perfectly competitive firm, marginal revenue product is equal to:
1. price minus marginal cost
2. price times marginal revenue
3. price times marginal product
4. none of the above
1. price minus marginal cost
2. price times marginal revenue
3. price times marginal product
4. none of the above
question
$10,000
answer
Alan Jones owns a company that sells life insurance. When he employs 10 salespersons his firm sells $200,000 worth of contracts per week, and when he employs 11 salespersons, total revenue is $210,000. The marginal revenue product of the 11th salesperson is
1. $410,000
2. $10,000
3. $20,000
4. $210,000
1. $410,000
2. $10,000
3. $20,000
4. $210,000
question
horizontal labor supply curve
answer
An individual firm in a competitive labor market faces a(n):
1. horizontal labor supply curve
2. backward-bending labor supply curve
3. downward-sloping labor supply curve
4. upward-sloping labor supply curve
1. horizontal labor supply curve
2. backward-bending labor supply curve
3. downward-sloping labor supply curve
4. upward-sloping labor supply curve
question
effective advertising that convinces customers to buy the "union label."
answer
A union can influence the demand for labor by
1. requiring union fees
2. raising union fees
3. effective advertising that convinces customers to buy the "union label."
4. all of the above
1. requiring union fees
2. raising union fees
3. effective advertising that convinces customers to buy the "union label."
4. all of the above
question
increase the factor price to hire more.
answer
A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:
1. lower the factor price to hire more
2. increase the price of its product to sell more
3. increase the factor price to hire more.
4. lower the product price to sell more
1. lower the factor price to hire more
2. increase the price of its product to sell more
3. increase the factor price to hire more.
4. lower the product price to sell more
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