question
Economics
answer
the study of choices we make among our many wants and desires given our limited resources
question
Resources
answer
inputs used to produce goods and services
question
C. our unlimited wants exceed our limited resources.
answer
If a good is scarce,
A. It only needs to be limited.
B. It is not possible to produce any more of the good.
C. Our unlimited wants exceed our limited resources.
D. Our limited wants exceed our unlimited resources.
A. It only needs to be limited.
B. It is not possible to produce any more of the good.
C. Our unlimited wants exceed our limited resources.
D. Our limited wants exceed our unlimited resources.
question
B) They are the inputs used to produce goods and services
answer
Which of the following is true of resources?
A) their availability is unlimited
B) They are the inputs used to produce goods and services
C) Increasing the amount of resources available could eliminate scarcity
D) Both B and C
A) their availability is unlimited
B) They are the inputs used to produce goods and services
C) Increasing the amount of resources available could eliminate scarcity
D) Both B and C
question
D) all of the above would be true.
answer
If scarcity were not a fact,
A) people could have all the goods and services they wanted for free.
B) it would no longer be necessary to make choices.
C) poverty, defined as the lack of a minimum level of consumption, would also be eliminated.
D) all of the above would be true.
A) people could have all the goods and services they wanted for free.
B) it would no longer be necessary to make choices.
C) poverty, defined as the lack of a minimum level of consumption, would also be eliminated.
D) all of the above would be true.
question
D) all of the above.
answer
Economics is concerned with
A) the choices people must make because resources are scarce.
B) human decision makers and the factors that influence their choices.
C) the allocation of limited resources to satisfy unlimited wants.
D) all of the above.
A) the choices people must make because resources are scarce.
B) human decision makers and the factors that influence their choices.
C) the allocation of limited resources to satisfy unlimited wants.
D) all of the above.
question
C) allows one to analyze the relationship between two variables apart from the influence of other variables.
answer
The importance of the ceteris paribus assumption is that it
A) allows one to separate subjective issues from objective ones.
B) allows one to generalize from the whole to the individual.
C) allows one to analyze the relationship between two variables apart from the influence of other variables.
D) allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
A) allows one to separate subjective issues from objective ones.
B) allows one to generalize from the whole to the individual.
C) allows one to analyze the relationship between two variables apart from the influence of other variables.
D) allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
question
B) microeconomics.
answer
When we look at a particular segment of the economy, such as a given industry, we are studying
A) macroeconomics.
B) microeconomics.
C) normative economics.
D) positive economics.
A) macroeconomics.
B) microeconomics.
C) normative economics.
D) positive economics.
question
D) A decrease in the unemployment rate
answer
Which of the following is most likely a topic of discussion in macroeconomics?
A) An increase in the price of a pizza
B) A decrease in the production of stereos by a consumer electronics company
C) An increase in the wage rate paid to automobile workers
D) A decrease in the unemployment rate
E) The entry of new firms into the software industry
A) An increase in the price of a pizza
B) A decrease in the production of stereos by a consumer electronics company
C) An increase in the wage rate paid to automobile workers
D) A decrease in the unemployment rate
E) The entry of new firms into the software industry
question
D) All of the above can explain why the correlation may not imply causality.
answer
Which of the following statements can explain why correlation between Event A and Event B may not imply causality from A to B?
A) The observed correlation may be coincidental.
B) A third variable may be responsible for causing both events.
C) Causality may run from Event B to Event A instead of in the opposite direction.
D) All of the above can explain why the correlation may not imply causality.
A) The observed correlation may be coincidental.
B) A third variable may be responsible for causing both events.
C) Causality may run from Event B to Event A instead of in the opposite direction.
D) All of the above can explain why the correlation may not imply causality.
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C) mistaking correlation for causation.
answer
Ten-year-old Tommy observes that people who play football are larger than average and tells his mom that he's going to play football because it will make him big and strong. Tommy is
A) committing the fallacy of composition.
B) violating the ceteris paribus assumption.
C) mistaking correlation for causation.
D)committing the fallacy of decomposition.
A) committing the fallacy of composition.
B) violating the ceteris paribus assumption.
C) mistaking correlation for causation.
D)committing the fallacy of decomposition.
question
D) all of the above are true.
answer
The fallacy of composition
A) is a problem associated with aggregation.
B) assumes that if something is true for an individual, then it is necessarily true for a group of individuals.
C) is illustrated in the following statement: If I stand up at a football game, I will be able to see better; therefore, if we all stood up, we would all see better.
D) all of the above are true.
A) is a problem associated with aggregation.
B) assumes that if something is true for an individual, then it is necessarily true for a group of individuals.
C) is illustrated in the following statement: If I stand up at a football game, I will be able to see better; therefore, if we all stood up, we would all see better.
D) all of the above are true.
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D) An increase in tax rates will reduce unemployment.
answer
Which of the following is a positive statement?
A) New tax laws are needed to help the poor.
B) Teenage unemployment should be reduced.
C) We should increase Social Security payments to older adults.
D) An increase in tax rates will reduce unemployment.
E) It is only fair that firms protected from competition by government-granted monopolies pay higher corporate taxes.
A) New tax laws are needed to help the poor.
B) Teenage unemployment should be reduced.
C) We should increase Social Security payments to older adults.
D) An increase in tax rates will reduce unemployment.
E) It is only fair that firms protected from competition by government-granted monopolies pay higher corporate taxes.
question
D) All of the above are true.
answer
Positive statements
A) are testable.
B) are attempts to describe what happens and why it happens.
C) do not have to be a true statement.
D) All of the above are true.
A) are testable.
B) are attempts to describe what happens and why it happens.
C) do not have to be a true statement.
D) All of the above are true.
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D) are subjective and attempt to prescribe what should be done.
answer
Normative statements
A) attempt to describe what happens and why it happens.
B) are objective and testable.
C) attempt to describe the way the world works.
D) are subjective and attempt to prescribe what should be done.
A) attempt to describe what happens and why it happens.
B) are objective and testable.
C) attempt to describe the way the world works.
D) are subjective and attempt to prescribe what should be done.
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C) subjective, prescriptive, and normative.
answer
The statement "the government should increase spending for the space program" is
A) objective and testable.
B) a positive statement.
C) subjective, prescriptive, and normative.
D) a fact and very important for the defense of our country.
A) objective and testable.
B) a positive statement.
C) subjective, prescriptive, and normative.
D) a fact and very important for the defense of our country.
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D) All of the above statements are true.
answer
Which of the following statements is (are) true?
A)Economists disagree but most often over normative issues.
B) Economists do agree over a wide range of issues.
C) Disagreement is also common in other disciplines.
D) All of the above statements are true.
A)Economists disagree but most often over normative issues.
B) Economists do agree over a wide range of issues.
C) Disagreement is also common in other disciplines.
D) All of the above statements are true.
question
Scarcity
answer
_______ occurs because our unlimited wants exceed our limited resources.
question
limited
answer
Economics is the study of the choices we make among our many wants and desires given our_________ resources.
question
inputs
answer
Resources are ________ used to produce goods and services.
question
scarcity; value
answer
The economic problem is that _______ forces us to choose, and choices are costly because we must give up other opportunities that we _______.
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trade-offs
answer
Living in a world of scarcity means ______
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Macroeconomics; microeconomics
answer
________ deals with the aggregate (the forest), or total economy, while ________ deals with the smaller units (the trees) within the economy.
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predictable
answer
Economists assume that individuals act as if they are motivated by self-interest and respond in _______ ways to changing circumstances.
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rational
answer
Economists believe that it is ________ for people to anticipate the likely future consequences of their behavior.
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ceteris paribus
answer
In order to isolate the effects of one variable on another, we use the __________ assumption.
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correlation
answer
When two events usually occur together, it is called ________
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causation.
answer
When one event brings on another event, it is called ________
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fallacy of composition
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The _________ is the incorrect view that what is true for an individual is always true for the group.
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positive
answer
The objective, value-free approach to economics, based on the scientific method, is called ________ analysis.
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Normative
answer
________ analysis involves judgments about what should be or what ought to happen.
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Positive; prescriptive
answer
__________analysis is descriptive; normative analysis is ________
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positive
answer
"A tax increase will lead to a lower rate of inflation" is a(n) ________ economic statement.
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scarcity
answer
exists when human wants (material and nonmaterial) exceed available resources
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the economic problem
answer
scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value
question
Purposefully
answer
Rational behavior implies that most people act ________
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rational behavior
answer
people do the best they can, based on their values and information, under current and anticipated future circumstances
question
theories and models
answer
simplified versions of the real world used to explain and predict behavior
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ceteris paribus
answer
holding all other things constant
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Microeconomics
answer
the study of household and firm behavior and how they interact in the marketplace
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macroeconomics
answer
the study of the whole economy, including the topics of inflation, unemployment, and economic growth
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aggregate
answer
the total amount
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correlation
answer
when two events occur together
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causation
answer
when one event brings about another event
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fallacy of composition
answer
the incorrect view that what is true for the individual is always true for the group
question
positive statement
answer
an objective, testable statement that describes what happens and why it happens
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normative statement
answer
a subjective, contestable statement that attempts to describe what should be done
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E) all of the above
answer
Which of the following is a market?
A) a garage sale
B) a restaurant
C) the New York Stock Exchange
D) an eBay auction
E) all of the above
A) a garage sale
B) a restaurant
C) the New York Stock Exchange
D) an eBay auction
E) all of the above
question
D) all of the above are true.
answer
In a competitive market,
A) there are a number of buyers and sellers.
B) no single buyer or seller can appreciably affect the market price.
C) sellers offer similar products.
D) all of the above are true.
A) there are a number of buyers and sellers.
B) no single buyer or seller can appreciably affect the market price.
C) sellers offer similar products.
D) all of the above are true.
question
B) demand; supply
answer
Buyers determine the side of the market; sellers determine the side of the market.
A) demand; demand
B) demand; supply
C) supply; demand
D) supply; supply
A) demand; demand
B) demand; supply
C) supply; demand
D) supply; supply
question
D) decrease in the quantity of milk demanded.
answer
If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n)
A) increase in the demand for milk.
B) decrease in the demand for milk.
C) increase in the quantity of milk demanded.
D) decrease in the quantity of milk demanded.
E) decrease in the supply of milk.
A) increase in the demand for milk.
B) decrease in the demand for milk.
C) increase in the quantity of milk demanded.
D) decrease in the quantity of milk demanded.
E) decrease in the supply of milk.
question
D) All of the above are true.
answer
Which of the following is true?
A) The law of demand states that when the price of a good falls (rises), the quantity demanded rises (falls), ceteris paribus.
B) An individual demand curve is a graphical representation of the relationship between the price and the quantity demanded.
C) The market demand curve shows the amount of a good that all buyers in the market would be willing and able to buy at various prices.
D) All of the above are true.
A) The law of demand states that when the price of a good falls (rises), the quantity demanded rises (falls), ceteris paribus.
B) An individual demand curve is a graphical representation of the relationship between the price and the quantity demanded.
C) The market demand curve shows the amount of a good that all buyers in the market would be willing and able to buy at various prices.
D) All of the above are true.
question
E) Answers (a) and (c) are true.
answer
Which of the following is true?
A) The relationship between price and quantity demanded is inverse or negative.
B) The market demand curve is the vertical summation of individual demand curves.
C) A change in a good's price causes a movement along its demand curve.
D) All of the above are true.
E) Answers (a) and (c) are true.
A) The relationship between price and quantity demanded is inverse or negative.
B) The market demand curve is the vertical summation of individual demand curves.
C) A change in a good's price causes a movement along its demand curve.
D) All of the above are true.
E) Answers (a) and (c) are true.
question
B) an increase in income; jelly is a normal good
answer
Which of the following would be most likely to increase the demand for jelly?
A) an increase in the price of peanut butter, which is often used with jelly
B) an increase in income; jelly is a normal good
C) a decrease in the price of jelly
D) medical research that finds that daily consumption of jelly makes people live 10 years less, on average
A) an increase in the price of peanut butter, which is often used with jelly
B) an increase in income; jelly is a normal good
C) a decrease in the price of jelly
D) medical research that finds that daily consumption of jelly makes people live 10 years less, on average
question
D) an increase in the price of cheese
answer
Which of the following would not cause a change in the demand for cheese?
A) an increase in the price of crackers, which are consumed with cheese
B) an increase in the income of cheese consumers
C) an increase in the population of cheese lovers
D) an increase in the price of cheese
A) an increase in the price of crackers, which are consumed with cheese
B) an increase in the income of cheese consumers
C) an increase in the population of cheese lovers
D) an increase in the price of cheese
question
A) complements
answer
Whenever the price of Good A decreases, the demand for Good B increases. Goods A and B appear to be
A) complements.
B) substitutes.
C) inferior goods.
D) normal goods.
E) inverse goods.
A) complements.
B) substitutes.
C) inferior goods.
D) normal goods.
E) inverse goods.
question
B) substitutes.
answer
Whenever the price of Good A increases, the demand for Good B increases as well. Goods A and B appear to be
A) complements.
B) substitutes.
C) inferior goods.
D) normal goods.
E) inverse goods.
A) complements.
B) substitutes.
C) inferior goods.
D) normal goods.
E) inverse goods.
question
A) quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
answer
The difference between a change in quantity demanded and a change in demand is that a change in
A) quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
B) demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
C) quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
D) This is a trick question. A change in demand and a change in quantity demanded are the same thing.
A) quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
B) demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
C) quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
D) This is a trick question. A change in demand and a change in quantity demanded are the same thing.
question
B) the current market demand for chocolate will increase.
answer
Suppose CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result,
A) the current market demand for chocolate will decrease.
B) the current market demand for chocolate will increase.
C) the current quantity demanded for chocolate will decrease.
D) no change will occur in the current market for chocolate.
A) the current market demand for chocolate will decrease.
B) the current market demand for chocolate will increase.
C) the current quantity demanded for chocolate will decrease.
D) no change will occur in the current market for chocolate.
question
B) demand will fall.
answer
If incomes are rising, in the market for an inferior good,
A) demand will rise.
B) demand will fall.
C) supply will rise.
D) supply will fall.
A) demand will rise.
B) demand will fall.
C) supply will rise.
D) supply will fall.
question
C) sellers are willing to increase production of their goods if they receive higher prices for them.
answer
An upward-sloping supply curve shows that
A) buyers are willing to pay more for particularly scarce products.
B) sellers expand production as the product price falls.
C) sellers are willing to increase production of their goods if they receive higher prices for them.
D) buyers are willing to buy more as the product price falls.
A) buyers are willing to pay more for particularly scarce products.
B) sellers expand production as the product price falls.
C) sellers are willing to increase production of their goods if they receive higher prices for them.
D) buyers are willing to buy more as the product price falls.
question
B) quantity supplied changes as price changes.
answer
Along a supply curve,
A) supply changes as price changes.
B) quantity supplied changes as price changes.
C) supply changes as technology changes.
D) quantity supplied changes as technology changes.
A) supply changes as price changes.
B) quantity supplied changes as price changes.
C) supply changes as technology changes.
D) quantity supplied changes as technology changes.
question
...
answer
A supply curve illustrates a(n) relationship between and .
A) direct; price; supply
B) direct; price; quantity demanded
C) direct; price; quantity supplied
D) introverted; price; quantity demanded
E) inverse; price; quantity supplied
A) direct; price; supply
B) direct; price; quantity demanded
C) direct; price; quantity supplied
D) introverted; price; quantity demanded
E) inverse; price; quantity supplied
question
D) All of the above are true.
answer
Which of the following is true?
A) The law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied.
B) The relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that suppliers will require higher prices.
C) The market supply curve is a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices.
D) All of the above are true.
A) The law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied.
B) The relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that suppliers will require higher prices.
C) The market supply curve is a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices.
D) All of the above are true.
question
D) an increase in consumer income
answer
All of the following factors will affect the supply of shoes except one. Which will not affect the supply of shoes?
A) higher wages for shoe factory workers
B) higher prices for leather
C) a technological improvement that reduces waste of leather and other raw materials in shoe production
D) an increase in consumer income
A) higher wages for shoe factory workers
B) higher prices for leather
C) a technological improvement that reduces waste of leather and other raw materials in shoe production
D) an increase in consumer income
question
A) quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
answer
The difference between a change in quantity supplied and a change in supply is that a change in
A) quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
B) supply is caused by a change in a good's own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
C) quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
D) supply and a change in the quantity supplied are the same thing.
A) quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
B) supply is caused by a change in a good's own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
C) quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
D) supply and a change in the quantity supplied are the same thing.
question
C) input prices; supply decreases
answer
Antonio's makes the greatest pizza and delivers it hot to all the dorms around campus. Last week Antonio's supplier of pepperoni informed him of a 25 percent increase in price. Which variable determining the position of the supply curve has changed, and what effect does it have on supply?
A) future expectations; supply decreases
B) future expectations; supply increases
C) input prices; supply decreases
D) input prices; supply increases
E) technology; supply increases
A) future expectations; supply decreases
B) future expectations; supply increases
C) input prices; supply decreases
D) input prices; supply increases
E) technology; supply increases
question
C) tastes
answer
Which of the following is not a determinant of supply?
A) input prices
B) technology
C) tastes
D) expectations
E) the prices of related goods
A) input prices
B) technology
C) tastes
D) expectations
E) the prices of related goods
question
C) some firms leaving the industry.
answer
A leftward shift in supply could be caused by
A) an improvement in productive technology.
B) a decrease in income.
C) some firms leaving the industry.
D) a fall in the price of inputs to the industry.
A) an improvement in productive technology.
B) a decrease in income.
C) some firms leaving the industry.
D) a fall in the price of inputs to the industry.
question
D) surplus; shortage
answer
A market will experience a in a situation where quantity supplied exceeds quantity demanded and a in a situation where quantity demanded exceeds quantity supplied.
A) shortage; shortage
B) surplus; surplus
C) shortage; surplus
D) surplus; shortage
A) shortage; shortage
B) surplus; surplus
C) shortage; surplus
D) surplus; shortage
question
A) a temporary shortage at the current price occurs (assuming no price controls are imposed).
answer
The price of a good will tend to rise when
A) a temporary shortage at the current price occurs (assuming no price controls are imposed).
B) a temporary surplus at the current price occurs (assuming no price controls are imposed).
C) demand decreases.
D) supply increases.
A) a temporary shortage at the current price occurs (assuming no price controls are imposed).
B) a temporary surplus at the current price occurs (assuming no price controls are imposed).
C) demand decreases.
D) supply increases.
question
E) All of the above are true.
answer
Which of the following is true?
A) The intersection of the supply and demand curves shows the equilibrium price and equilibrium quantity in a market.
B) A surplus is a situation where quantity supplied exceeds quantity demanded.
C) A shortage is a situation where quantity demanded exceeds quantity supplied.
D) Shortages and surpluses set in motion actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented.
E) All of the above are true.
A) The intersection of the supply and demand curves shows the equilibrium price and equilibrium quantity in a market.
B) A surplus is a situation where quantity supplied exceeds quantity demanded.
C) A shortage is a situation where quantity demanded exceeds quantity supplied.
D) Shortages and surpluses set in motion actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented.
E) All of the above are true.
question
market; exchanging
answer
A(n) _______ is the process of buyers and sellers _______ goods and services.
question
trade.
answer
The important point about a market is what it does—it facilitates _____
question
Buyers; Sellers
answer
_______, as a group, determine the demand side of the market._________, as a group, determine the supply side of the market.
question
competitive
answer
A(n) ________ market consists of many buyers and sellers, no single one of whom can influence the market price.
question
quantity demanded
answer
According to the law of demand, other things being equal, when the price of a good or service falls, the _________ increases.
question
demand
answer
An individual ________ curve reveals the different amounts of a particular good a person would be willing and able to buy at various possible prices in a particular time interval, other things being equal.
question
market demand
answer
The __________ curve for a product is the horizontal summing of the demand curves of the individuals in the market.
question
a good's price; movement along
answer
A change in _________ leads to a change in quantity demanded, illustrated by a(n) _________ demand curve.
question
the prices of related goods; income; number; expectations
answer
A change in demand is caused by changes in any of the other factors (besides the good's own price) that would affect how much of the good is pur-chased: __________, _________, the _______ of buyers, tastes, and ________.
question
rightward; leftward
answer
An increase in demand is represented by a _______ shift in the demand curve; a decrease in demand is represented by a(n) _________ shift in the demand curve.
question
substitutes; right
answer
Two goods are called _______if an increase in the price of one causes the demand curve for another good to shift to the_______.
question
increase; decrease
answer
For normal goods an increase in income leads to a(n) _______ in demand, and a decrease in income leads to a(n) _______ in demand, other things being equal.
question
increase
answer
An increase in the expected future price of a good or an increase in expected future income may ______ current demand.
question
quantity supplied; quantity supplied
answer
According to the law of supply, the higher the price of the good, the greater the _______, and the lower the price of the good, the smaller the._______
question
profits; production; higher
answer
The quantity supplied is positively related to the price because firms supplying goods and services want to increase their _______ and because increasing ______ costs mean that the sellers will require _____ prices to induce them to increase their output.
question
positive
answer
An individual supply curve is a graphical representation that shows the ________ relationship between the price and the quantity supplied.
question
willing; able
answer
The market supply curve is a graphical representation of the amount of goods and services that sellers are ______ and ______ to supply at various prices.
question
seller's input prices; expectations; number of sellers; technology and the prices of related goods.
answer
Possible supply determinants (factors that determine the position of the supply curve) are ________; __________; ____________ of sellers and __________.
question
lower ; right
answer
A fall in input prices will ______the costs of production, causing the supply curve to shift to the ________.
question
increases
answer
The supply of a good ________ if the price of one of its substitutes in production falls.
question
decreases
answer
The supply of a good _______ if the price of one of its substitutes in production rises.
question
equilibrium
answer
The price at the intersection of the market demand curve and the market supply curve is called the _____ price, and the quantity is called the _______ quantity.
question
surplus
answer
A situation where quantity supplied is greater than quantity demanded is called a(n) _______
question
shortage.
answer
A situation where quantity demanded is greater than quantity supplied is called a(n) _______
question
surplus; more...lower; cut back; more
answer
At a price greater than the equilibrium price, a(n) _____, or excess quantity supplied, would exist. Sellers would be willing to sell _____ than demanders would be willing to buy. Frustrated suppliers would _______ their price and ______ on production, and consumers would buy _____, returning the market to equilibrium.
question
a. True
answer
When making decisions on pricing and other behaviors, oligopolistic firms must take into account the actions of other firms.
a. True
b. False
a. True
b. False
question
a. of all the above reasons.
answer
Overt collusion is relatively rare because:
a. of all the above reasons.
b. they are illegal in some countries, including the United States.
c. members frequently have an incentive to cheat on the cartel.
d. members find it difficult to agree on key decisions.
a. of all the above reasons.
b. they are illegal in some countries, including the United States.
c. members frequently have an incentive to cheat on the cartel.
d. members find it difficult to agree on key decisions.
question
a. oligopoly.
answer
In which market structure is there clear interdependence between individual firms with regard to prices and sales?
a. oligopoly.
b. pure competition.
c. monopoly.
d. monopolistic competition.
a. oligopoly.
b. pure competition.
c. monopoly.
d. monopolistic competition.
question
a. True
answer
An oligopoly firm cannot know the demand curve it faces unless it knows what its rivals will do in reaction to changes it initiates.
a. True
b. False
a. True
b. False
question
a. True
answer
One of the most famous cartels is OPEC.
a. True
b. False
a. True
b. False
question
b. False
answer
Oligopoly firms are guaranteed economic profits in the long run.
a. True
b. False
a. True
b. False
question
c. both (b) and (c).
answer
Cartels are difficult to maintain because:
a. there are generally few barriers to entry in oligopoly markets.
b. it is difficult to enforce a cartel agreement.
c. both (b) and (c).
d. firms have a strong private incentive to cheat on agreements.
a. there are generally few barriers to entry in oligopoly markets.
b. it is difficult to enforce a cartel agreement.
c. both (b) and (c).
d. firms have a strong private incentive to cheat on agreements.
question
a. A Nash equilibrium is just another name for a dominant strategy.
answer
Which of the following is false?
a. A Nash equilibrium is just another name for a dominant strategy.
b. A Nash equilibrium is a self-enforcing equilibrium.
c. A Nash equilibrium can be a dominant strategy.
d. A Nash equilibrium maximizes a player's welfare, given the actions of its competitor, while a dominant strategy maximizes a player's welfare, regardless of the behavior of its competitor.
a. A Nash equilibrium is just another name for a dominant strategy.
b. A Nash equilibrium is a self-enforcing equilibrium.
c. A Nash equilibrium can be a dominant strategy.
d. A Nash equilibrium maximizes a player's welfare, given the actions of its competitor, while a dominant strategy maximizes a player's welfare, regardless of the behavior of its competitor.
question
a. True
answer
It more difficult for firms to reach collusive agreements when they are of different sizes, with substantially different production costs and estimates of demand conditions, than when these differences are smaller.
a. True
b. False
a. True
b. False
question
b. snob effect; congestion
answer
Which of the following could result in a negative network externality?
a. bandwagon effect; standardization
b. snob effect; congestion
c. snob effect; standardization
d. bandwagon effect; congestion
a. bandwagon effect; standardization
b. snob effect; congestion
c. snob effect; standardization
d. bandwagon effect; congestion
question
a. True
answer
When an oligopoly cuts its price to try and attract customers from rivals, it could lead to a price war.
a. True
b. False
a. True
b. False
question
d. oligopoly.
answer
The tools of "game theory" are most helpful to economists in markets characterized by:
a. monopolistic competition.
b. perfect competition.
c. monopoly.
d. oligopoly.
a. monopolistic competition.
b. perfect competition.
c. monopoly.
d. oligopoly.
question
c. A negative network externality
answer
Traffic congestion represents
a. A positive network externality
b. A Bandwagon effect
c. A negative network externality
d. Neither a positive nor a negative externality snob effect; congestion
a. A positive network externality
b. A Bandwagon effect
c. A negative network externality
d. Neither a positive nor a negative externality snob effect; congestion
question
c. will rise.
answer
Whenever any firms in a concentrated industry merge, the Herfindahl-Hirschman Index:
a. will fall.
b. may rise or stay the same.
c. will rise.
d. may rise or fall.
a. will fall.
b. may rise or stay the same.
c. will rise.
d. may rise or fall.
question
a. All of the above would have to be true.
answer
For a firm to be engaged in predatory pricing, and for it to be successful:
a. All of the above would have to be true.
b. It would have to charge a price less than the average variable cost of production.
c. It would have to raise its prices after rivals were driven out of the market.
d. It would have to drive rivals out of the market.
a. All of the above would have to be true.
b. It would have to charge a price less than the average variable cost of production.
c. It would have to raise its prices after rivals were driven out of the market.
d. It would have to drive rivals out of the market.
question
d. Horizontal mergers
answer
Which of the following types of mergers are of greater concern as being anticompetitive among antitrust regulators?
a. Vertical mergers
b. Conglomerate mergers
c. Horizontal, vertical and conglomerate mergers are of equal concern as being anticompetitive
d. Horizontal mergers
a. Vertical mergers
b. Conglomerate mergers
c. Horizontal, vertical and conglomerate mergers are of equal concern as being anticompetitive
d. Horizontal mergers
question
c. increasing; decreasing
answer
Cartel members have a collective interest in ____ industry price and a private interest in ____ their own prices.
a. decreasing; decreasing
b. increasing; increasing
c. increasing; decreasing
d. decreasing; increasing
a. decreasing; decreasing
b. increasing; increasing
c. increasing; decreasing
d. decreasing; increasing
question
c. members cheating by giving secret discounts.
answer
Cartels usually succumb to divisive forces caused by:
a. stringent enforcement of a cartel agreement.
b. insufficient profits compared to independent operations.
c. members cheating by giving secret discounts.
d. the similarity of production costs across member firms.
a. stringent enforcement of a cartel agreement.
b. insufficient profits compared to independent operations.
c. members cheating by giving secret discounts.
d. the similarity of production costs across member firms.
question
a. marginal revenue; marginal cost
answer
Equilibrium price and quantity for a collusive oligopoly are determined according to the intersection of the ____ curve and the horizontal sum of the short-run ____ curves for the oligopolists.
a. marginal revenue; marginal cost
b. marginal revenue; average total cost
c. total revenue; total cost
d. average revenue; average cost
a. marginal revenue; marginal cost
b. marginal revenue; average total cost
c. total revenue; total cost
d. average revenue; average cost
question
a. the failure to cooperate; cooperation would make everyone better off
answer
A "Prisoners' Dilemma" game demonstrates how ____ is often rational for individuals even though ____.
a. the failure to cooperate; cooperation would make everyone better off
b. All of the above can be demonstrated with a "Prisoners' Dilemma" game.
c. cooperative behavior; cooperative behavior might make everyone worse off
d. the failure to cooperate; cooperation would make everyone worse off
a. the failure to cooperate; cooperation would make everyone better off
b. All of the above can be demonstrated with a "Prisoners' Dilemma" game.
c. cooperative behavior; cooperative behavior might make everyone worse off
d. the failure to cooperate; cooperation would make everyone worse off
question
d. a large number of sellers
answer
Which of the following is not a common characteristic of oligopolistic firms?
a. mutual interdependence
b. nonprice competition
c. high barriers to entry
d. a large number of sellers
a. mutual interdependence
b. nonprice competition
c. high barriers to entry
d. a large number of sellers
question
b. False
answer
As in perfect and monopolistic competition, oligopoly firms cannot earn economic profits in the long run.
a. True
b. False
a. True
b. False
question
c. is characterized by both (b) and (c)
answer
Predatory pricing:
a. occurs when a firm increases price in order to exploit inelastic demand by consumers.
b. occurs when a firm prices below average variable cost in order to drive competitors out of the market.
c. is characterized by both (b) and (c).
d. is difficult to distinguish from vigorous competition in practice.
a. occurs when a firm increases price in order to exploit inelastic demand by consumers.
b. occurs when a firm prices below average variable cost in order to drive competitors out of the market.
c. is characterized by both (b) and (c).
d. is difficult to distinguish from vigorous competition in practice.
question
a. she confesses and the other prisoner does not.
answer
In the "Prisoners' Dilemma" game, an individual player is best off if:
a. she confesses and the other prisoner does not.
b. both prisoners confess.
c. the other prisoner confesses, while she does not.
d. neither prisoner confesses.
a. she confesses and the other prisoner does not.
b. both prisoners confess.
c. the other prisoner confesses, while she does not.
d. neither prisoner confesses.
question
b. A snob effect.
answer
A consumer's demand for a product decreases because other consumers own it. This would reflect:
a. a positive network externality.
b. A snob effect.
c. A bandwagon effect.
d. none of the above
a. a positive network externality.
b. A snob effect.
c. A bandwagon effect.
d. none of the above
question
d. both (b) and (c)
answer
High barriers to entry are generally found in:
a. oligopolistic markets.
b. monopolistically competitive markets.
c. monopolistic markets.
d. both (b) and (c).
a. oligopolistic markets.
b. monopolistically competitive markets.
c. monopolistic markets.
d. both (b) and (c).
question
b. Number of other people purchasing the good influencing the quantity demanded.
answer
Which of the following best reflects a network externality?
a. Proven quality of a product influencing the quantity demanded.
b. Number of other people purchasing the good influencing the quantity demanded.
c. Price of a good affecting a purchase decision.
d. Price of a related good affecting a purchase decision.
a. Proven quality of a product influencing the quantity demanded.
b. Number of other people purchasing the good influencing the quantity demanded.
c. Price of a good affecting a purchase decision.
d. Price of a related good affecting a purchase decision.
question
b. equal to the monopoly profit.
answer
The maximum possible profit that could be earned by a cartel is:
a. greater than the monopoly profit.
b. equal to the monopoly profit.
c. unrelated to the level of monopoly profit.
d. less than the monopoly profit.
a. greater than the monopoly profit.
b. equal to the monopoly profit.
c. unrelated to the level of monopoly profit.
d. less than the monopoly profit.
question
b. False
answer
Foreign firms are incorporated in four firm concentration ratios.
a. True
b. False
a. True
b. False
question
c. firms must anticipate the possible reaction of rivals to their own economic behavior.
answer
Mutual interdependence means that:
a. each firm faces a perfectly elastic demand curve.
b. each firm faces a perfectly inelastic demand curve.
c. firms must anticipate the possible reaction of rivals to their own economic behavior.
d. firms choose price and output simultaneously.
a. each firm faces a perfectly elastic demand curve.
b. each firm faces a perfectly inelastic demand curve.
c. firms must anticipate the possible reaction of rivals to their own economic behavior.
d. firms choose price and output simultaneously.
question
a. price leader.
answer
A large oligopolistic firm that unilaterally makes changes in price which competitors tend to follow is known as a:
a. price leader.
b. price maker.
c. dominant strategy firm.
d. cartel leader.
a. price leader.
b. price maker.
c. dominant strategy firm.
d. cartel leader.
question
a. price leadership.
answer
For a time, either R. J. Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton. The other firms in the industry raised their prices by the same amount. Economists call this: .
a. price leadership.
b. predatory pricing.
c. a price war.
d. producer sovereignty.
a. price leadership.
b. predatory pricing.
c. a price war.
d. producer sovereignty.
question
d. All of the above would have to be true.
answer
For a firm to be engaged in predatory pricing, and for it to be successful:
a. It would have to charge a price less than the average variable cost of production.
b. It would have to drive rivals out of the market.
c. It would have to raise its prices after rivals were driven out of the market.
d. All of the above would have to be true.
a. It would have to charge a price less than the average variable cost of production.
b. It would have to drive rivals out of the market.
c. It would have to raise its prices after rivals were driven out of the market.
d. All of the above would have to be true.
question
C and D
answer
An oligopolistic market structure is distinguished by several characteristics, one of which is either homogeneous or differentiated products. What are some other characteristics of this market structure? Check all that apply.
A) Market control by a few large firms
B) Mutual interdependence
C) Neither mutual interdependence nor complete independence
D) Market control by many small firms
E) Difficult entry
A) Market control by a few large firms
B) Mutual interdependence
C) Neither mutual interdependence nor complete independence
D) Market control by many small firms
E) Difficult entry
question
a. higher; less.
answer
A monopolist would charge ____ prices and produce ____ output than would exist under perfect competition.
a. higher; less.
b. lower; more.
c. higher; more.
d. the same; the same.
a. higher; less.
b. lower; more.
c. higher; more.
d. the same; the same.
question
b. always greater than marginal revenue.
answer
For a profit-maximizing monopolist, the price of a product is:
a. always equal to the average total cost of production.
b. always greater than marginal revenue.
c. always less than marginal revenue.
d. always equal to marginal revenue.
a. always equal to the average total cost of production.
b. always greater than marginal revenue.
c. always less than marginal revenue.
d. always equal to marginal revenue.
question
d. marginal revenue equals marginal cost.
answer
Profit-maximizing monopolists choose a level of output such that:
a. price equals marginal revenue but exceeds average variable cost.
b. price equals marginal cost but exceeds average variable cost.
c. average total cost is minimized.
d. marginal revenue equals marginal cost.
a. price equals marginal revenue but exceeds average variable cost.
b. price equals marginal cost but exceeds average variable cost.
c. average total cost is minimized.
d. marginal revenue equals marginal cost.
question
b. False
answer
The demand curve faced by a monopolist is the same as the marginal revenue curve.
a. True
b. False
a. True
b. False
question
a. True
answer
A price-discriminating monopoly firm will tend to charge a higher price to customers with a greater willingness to pay than it does to customers with a lower willingness to pay.
a. True
b. False
a. True
b. False
question
d. a + b + c + d + e
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.13.009_intro/c161a23b-7645-44ae-9be1-7eacda3e6b57.PNG
Refer to Exhibit 13-7. In perfect price discrimination, total welfare is area:
a. a + b + d
b. a + b + c
c. a
d. a + b + c + d + e
Refer to Exhibit 13-7. In perfect price discrimination, total welfare is area:
a. a + b + d
b. a + b + c
c. a
d. a + b + c + d + e
question
c. A monopoly leads to improved economies of scale in production.
answer
Which of the following is not a criticism sometimes leveled at monopolies?
a. A monopoly creates a welfare loss.
b. A monopoly retards innovation.
c. A monopoly leads to improved economies of scale in production.
d. A monopoly promotes inefficiency.
a. A monopoly creates a welfare loss.
b. A monopoly retards innovation.
c. A monopoly leads to improved economies of scale in production.
d. A monopoly promotes inefficiency.
question
b. The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
answer
Graphically which of the following is true for a monopoly?
a. The marginal revenue curve lies below the demand curve and is flatter than the demand curve.
b. The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
c. The marginal revenue curve lies above the demand curve and is flatter than the demand curve.
d. The marginal revenue curve lies above the demand curve and is steeper than the demand curve.
a. The marginal revenue curve lies below the demand curve and is flatter than the demand curve.
b. The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
c. The marginal revenue curve lies above the demand curve and is flatter than the demand curve.
d. The marginal revenue curve lies above the demand curve and is steeper than the demand curve.
question
b. False
answer
A profit-maximizing monopolist will choose to operate along the inelastic portion of its demand curve.
a. True
b. False
a. True
b. False
question
b. make zero economic profits.
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.13.007_intro/5211a639-56a7-48ba-bde2-16020b56e56d.PNG
Refer to Exhibit 13-5. If regulators set a price according to average-cost pricing, the firm will:
a. suffer an economic loss.
b. make zero economic profits.
c. earn positive economic profits.
d. earn the same level of profits as it would absent regulation.
Refer to Exhibit 13-5. If regulators set a price according to average-cost pricing, the firm will:
a. suffer an economic loss.
b. make zero economic profits.
c. earn positive economic profits.
d. earn the same level of profits as it would absent regulation.
question
c. decrease output and increase the price.
answer
A monopoly firm is charging the price the market will bear at a level of output where MC equals $22 and is increasing, MR equals $20, and average variable cost equals $17. To maximize profits, the firm should:
a. increase both output and price.
b. decrease both output and price.
c. decrease output and increase the price.
d. increase output but decrease the price.
a. increase both output and price.
b. decrease both output and price.
c. decrease output and increase the price.
d. increase output but decrease the price.
question
d. DFH.
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.13.001_intro/90c6ac3b-e728-47ef-8a14-705509e9c30a.PNG
Refer to Exhibit 13-1. The welfare loss due to monopoly is indicated in the diagram as area:
a. DGE.
b. DFQ2Q1.
c. EGQ3Q1.
d. DFH.
Refer to Exhibit 13-1. The welfare loss due to monopoly is indicated in the diagram as area:
a. DGE.
b. DFQ2Q1.
c. EGQ3Q1.
d. DFH.
question
c. the price of pizza is three times that of soda.
answer
Daniel enjoys both soda and pizza, allocating his purchases across these two goods so that his utility is maximized. If Daniel receives one-third as much utility from the last can of soda as from the last slice of pizza, we can say that:
a. the price of pizza is equal to that of soda.
b. the price of pizza is one-third that of soda.
c. the price of pizza is three times that of soda.
d. the price of pizza is twice that of soda.
a. the price of pizza is equal to that of soda.
b. the price of pizza is one-third that of soda.
c. the price of pizza is three times that of soda.
d. the price of pizza is twice that of soda.
question
b. False
answer
If a consumer is maximizing utility, she will purchase quantities of output to the point where the total utility per dollar spent on consumption is equal across all goods.
a. True
b. False
a. True
b. False
question
d. increase since less food is now likely to be consumed by students who eat a meal in the cafeteria.
answer
A university cafeteria changes from offering all-you-can-eat meals for one low price to selling each food item separately. After this change, one would expect that the marginal utility of the last food item consumed in the cafeteria by the typical student would:
a. not change since the same quantity of food is now likely to be consumed at each meal.
b. decrease since less food is now likely to be consumed by students who eat a meal in the cafeteria.
c. decrease since more food is now likely to be consumed by students who eat a meal in the cafeteria.
d. increase since less food is now likely to be consumed by students who eat a meal in the cafeteria.
a. not change since the same quantity of food is now likely to be consumed at each meal.
b. decrease since less food is now likely to be consumed by students who eat a meal in the cafeteria.
c. decrease since more food is now likely to be consumed by students who eat a meal in the cafeteria.
d. increase since less food is now likely to be consumed by students who eat a meal in the cafeteria.
question
a. one-half that of wine.
answer
Cheese is priced at $5 per pound and wine at $10 per bottle. A consumer who enjoys both cheese and wine will not be in consumer equilibrium until the marginal utility of a pound of cheese is:
a. one-half that of wine.
b. one-fourth that of wine.
c. two times that of wine.
d. four times that of wine.
a. one-half that of wine.
b. one-fourth that of wine.
c. two times that of wine.
d. four times that of wine.
question
d. has a negative slope.
answer
The law of diminishing marginal utility suggests that a demand curve:
a. shows a direct relationship between price and quantity demanded.
b. has a slope equal to zero.
c. has a positive slope.
d. has a negative slope.
a. shows a direct relationship between price and quantity demanded.
b. has a slope equal to zero.
c. has a positive slope.
d. has a negative slope.
question
a. True
answer
The total utility from consuming five muffins is 14, 24, 35, 43, and 50 utils, respectively. Marginal utility begins to diminish after consuming the first muffin.
a. True
b. False
a. True
b. False
question
b. consumer equilibrium
answer
When a consumer allocates her limited budgetary resources to maximize her well-being, ____ is achieved.
a. the elimination of scarcity
b. consumer equilibrium
c. the maximization of marginal utility
d. market equilibrium
a. the elimination of scarcity
b. consumer equilibrium
c. the maximization of marginal utility
d. market equilibrium
question
c. the marginal utility of the last dozen cookies is three times that of the last pint of ice cream.
answer
Grace maximizes her utility by consuming both gourmet cookies and ice cream. If the price of a dozen cookies is three times that of a pint of ice cream, we would expect that:
a. the marginal utility of the last dozen cookies is one-third times that of the last pint of ice cream.
b. the total utility of a dozen cookies is one-third that of a pint of ice cream.
c. the marginal utility of the last dozen cookies is three times that of the last pint of ice cream.
d. the total utility of a dozen cookies is three times that of a pint of ice cream.
a. the marginal utility of the last dozen cookies is one-third times that of the last pint of ice cream.
b. the total utility of a dozen cookies is one-third that of a pint of ice cream.
c. the marginal utility of the last dozen cookies is three times that of the last pint of ice cream.
d. the total utility of a dozen cookies is three times that of a pint of ice cream.
question
a. A person will receive less added satisfaction from consuming a fourth hot dog in a week than from consuming the third hot dog in a week.
answer
Diminishing marginal utility is best illustrated by which of the following statements?
a. A person will receive less added satisfaction from consuming a fourth hot dog in a week than from consuming the third hot dog in a week.
b. If the price of hot dogs declines, people's tastes for hot dogs will increase.
c. A person will receive less satisfaction from consuming four hot dogs than from consuming three hot dogs.
d. A decrease in the price of hot dogs will cause consumers to buy more hot dogs, because the lowered price has increased their effective real income.
a. A person will receive less added satisfaction from consuming a fourth hot dog in a week than from consuming the third hot dog in a week.
b. If the price of hot dogs declines, people's tastes for hot dogs will increase.
c. A person will receive less satisfaction from consuming four hot dogs than from consuming three hot dogs.
d. A decrease in the price of hot dogs will cause consumers to buy more hot dogs, because the lowered price has increased their effective real income.
question
d. there is no way a consumer, given the available income, could increase her satisfaction.
answer
Consumer equilibrium is reached when:
a. marginal utility is maximized, subject to the available income.
b. marginal utility begins to diminish.
c. an individual spends her entire income.
d. there is no way a consumer, given the available income, could increase her satisfaction.
a. marginal utility is maximized, subject to the available income.
b. marginal utility begins to diminish.
c. an individual spends her entire income.
d. there is no way a consumer, given the available income, could increase her satisfaction.
question
d. a higher price of cars and a smaller quantity of cars sold.
answer
If the government required car makers to install more costly and effective emission control devices on cars, it will lead to:
a. a lower price of cars and a larger quantity of cars sold.
b. a lower price of cars and a smaller quantity of cars sold.
c. a higher price of cars and a larger quantity of cars sold.
d. a higher price of cars and a smaller quantity of cars sold.
a. a lower price of cars and a larger quantity of cars sold.
b. a lower price of cars and a smaller quantity of cars sold.
c. a higher price of cars and a larger quantity of cars sold.
d. a higher price of cars and a smaller quantity of cars sold.
question
b. offer a subsidy for production of the good in order to increase production.
answer
If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:
a. impose a tax on production of the good in order to increase production.
b. offer a subsidy for production of the good in order to increase production.
c. impose a tax on production of the good in order to decrease production.
d. offer a subsidy for production of the good in order to decrease production.
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a. impose a tax on production of the good in order to increase production.
b. offer a subsidy for production of the good in order to increase production.
c. impose a tax on production of the good in order to decrease production.
d. offer a subsidy for production of the good in order to decrease production.
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question
d. Costs of capital, entrepreneurship, land, and labor
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.08.002_intro/c446ca19-3917-435e-9546-948ce0105d68.PNG
Refer to Exhibit 8-2. The supply curve S private includes the following costs.
a. Costs that production imposes on others
b. External costs and spillover costs
c. Private costs and external costs
d. Costs of capital, entrepreneurship, land, and labor
Refer to Exhibit 8-2. The supply curve S private includes the following costs.
a. Costs that production imposes on others
b. External costs and spillover costs
c. Private costs and external costs
d. Costs of capital, entrepreneurship, land, and labor
question
a. non-excludable and non-rivalrous
answer
The consumption of public goods is
a. non-excludable and non-rivalrous
b. excludable and rivalrous
c. excludable and non-rivalrous
d. non-excludable and rivalrous
a. non-excludable and non-rivalrous
b. excludable and rivalrous
c. excludable and non-rivalrous
d. non-excludable and rivalrous
question
d. private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them.
answer
The market system fails to provide the efficient output of public goods because:
a. people place no value on public goods.
b. public enterprises can produce those goods at lower cost than private firms.
c. public goods create widespread spillover costs.
d. private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them.
a. people place no value on public goods.
b. public enterprises can produce those goods at lower cost than private firms.
c. public goods create widespread spillover costs.
d. private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them.
question
b. Price is too low; output is too large.
answer
Suppose that firms in the chemical industry are allowed, free of charge, to dump harmful products into rivers. If this is the case in a competitive market, how will the price and output of the chemical products compare with their values under conditions of ideal economic efficiency?
a. Price is too high; output is too small.
b. Price is too low; output is too large.
c. Price is too high; output is too large.
d. Price is too low; output is too small.
a. Price is too high; output is too small.
b. Price is too low; output is too large.
c. Price is too high; output is too large.
d. Price is too low; output is too small.
question
a. True
answer
The government can act to internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.
a. True
b. False
a. True
b. False
question
a. Some homeowners in a mountain resort area refuse to contribute toward paving the area's only access road.
answer
Which of the following best illustrates the free-rider problem?
a. Some homeowners in a mountain resort area refuse to contribute toward paving the area's only access road.
b. A tollbooth is constructed at the entrance of a privately funded highway.
c. You erect a locked gate around your swimming pool to keep out unsupervised children.
d. Individuals contribute toward a national defense program by paying taxes to the government.
a. Some homeowners in a mountain resort area refuse to contribute toward paving the area's only access road.
b. A tollbooth is constructed at the entrance of a privately funded highway.
c. You erect a locked gate around your swimming pool to keep out unsupervised children.
d. Individuals contribute toward a national defense program by paying taxes to the government.
question
b. decrease the quantity of pollution generated.
answer
A tax on pollution would:
a. increase the quantity of pollution generated by giving firms the right to pollute.
b. decrease the quantity of pollution generated.
c. result in firms polluting the same amount as before the imposition of a tax.
d. have an indeterminate impact on pollution levels.
a. increase the quantity of pollution generated by giving firms the right to pollute.
b. decrease the quantity of pollution generated.
c. result in firms polluting the same amount as before the imposition of a tax.
d. have an indeterminate impact on pollution levels.
question
a. there will be too few public goods produced.
answer
In a competitive economy with no government sector:
a. there will be too few public goods produced.
b. goods with spillover benefits will not be produced at all.
c. too few resources be allocated to each industry.
d. goods with spillover costs will be underproduced.
a. there will be too few public goods produced.
b. goods with spillover benefits will not be produced at all.
c. too few resources be allocated to each industry.
d. goods with spillover costs will be underproduced.
question
b. False
answer
A cost that spills over onto individuals not directly involved in an activity is called a positive externality.
a. True
b. False
a. True
b. False
question
a. True
answer
When a country allows trade and becomes an exporter of goods, producers gain more than consumers lose.
a. True
b. False
a. True
b. False
question
a. True
answer
The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.
a. True
b. False
a. True
b. False
question
a. True
answer
The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.
a. True
b. False
a. True
b. False
question
b. both employers and workers in the affected industry lobby for protectionist policies.
answer
Protectionist legislation is often passed because:
a. trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run.
b. both employers and workers in the affected industry lobby for protectionist policies.
c. employers in the affected industry lobby more effectively than the workers in that industry.
d. it helps to keep domestic prices at a relatively lower level.
a. trade restrictions often benefit domestic consumers in the long run, though they must pay more in the short run.
b. both employers and workers in the affected industry lobby for protectionist policies.
c. employers in the affected industry lobby more effectively than the workers in that industry.
d. it helps to keep domestic prices at a relatively lower level.
question
a. They increase consumer surplus for domestic consumers.
answer
Which of the following is not an argument favoring tariffs?
a. They increase consumer surplus for domestic consumers.
b. They help infant industries grow.
c. They reduce domestic unemployment.
d. They are necessary for national security reasons.
a. They increase consumer surplus for domestic consumers.
b. They help infant industries grow.
c. They reduce domestic unemployment.
d. They are necessary for national security reasons.
question
a. True
answer
The intended gains from U.S. tariffs and other trade restrictions can backfire if foreign governments retaliate by imposing additional trade restrictions on U.S. goods sold in their countries.
a. True
b. False
a. True
b. False
question
b. B + C + D
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.18.004_intro/34953a4a-70ff-4317-a50a-7497a7a6e321.PNG
Refer to Exhibit 18-4. The change in producer surplus from free trade is equal to area:
a. E + F
b. B + C + D
c. D
d. E + F + B + C + D
Refer to Exhibit 18-4. The change in producer surplus from free trade is equal to area:
a. E + F
b. B + C + D
c. D
d. E + F + B + C + D
question
c. $7 and $1 respectively.
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.18.007_intro/2c62ef27-5381-4806-9cfb-f8f2e71c4b23.PNG
Refer to Exhibit 18-7: The maximum price the consumer is willing to pay for the first unit and minimum price the producer would demand is:
a. $8 and $1 respectively.
b. $4 and $4 respectively.
c. $7 and $1 respectively.
d. $8 and $4 respectively.
Refer to Exhibit 18-7: The maximum price the consumer is willing to pay for the first unit and minimum price the producer would demand is:
a. $8 and $1 respectively.
b. $4 and $4 respectively.
c. $7 and $1 respectively.
d. $8 and $4 respectively.
question
b. limit voluntary exchanges.
answer
Economically speaking, tariffs:
a. protect domestic consumers of goods.
b. limit voluntary exchanges.
c. protect foreign producers of goods.
d. protect domestic producers of exported goods.
a. protect domestic consumers of goods.
b. limit voluntary exchanges.
c. protect foreign producers of goods.
d. protect domestic producers of exported goods.
question
a. domestic consumers gain, domestic producers lose, and the gains outweigh the losses.
answer
Compared to the no-trade situation, when a country imports a good:
a. domestic consumers gain, domestic producers lose, and the gains outweigh the losses.
b. domestic consumers gain, domestic producers lose, and the losses outweigh the gains.
c. domestic consumers lose, domestic producers gain, and the gains outweigh the losses.
d. domestic consumers gain, domestic producers lose an equal amount.
a. domestic consumers gain, domestic producers lose, and the gains outweigh the losses.
b. domestic consumers gain, domestic producers lose, and the losses outweigh the gains.
c. domestic consumers lose, domestic producers gain, and the gains outweigh the losses.
d. domestic consumers gain, domestic producers lose an equal amount.
question
d. b + d
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.07.009_intro/999bf0cd-b415-4376-a4ec-a8fa683ac3fd.PNG
Refer to Exhibit 7-9. The amount of tax revenue after the tax is area:
a. c + e
b. a + b + d + f
c. d + e + f
d. b + d
Refer to Exhibit 7-9. The amount of tax revenue after the tax is area:
a. c + e
b. a + b + d + f
c. d + e + f
d. b + d
question
a. True
answer
Consumer surplus is always the total area below the demand curve and above the price.
a. True
b. False
a. True
b. False
question
d. as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost.
answer
A price ceiling imposed below equilibrium price causes a deadweight loss for society because:
a. buyers benefit at the expense of sellers.
b. sellers benefit at the expense of buyers.
c. the poor gain at the expense of the rich.
d. as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost.
a. buyers benefit at the expense of sellers.
b. sellers benefit at the expense of buyers.
c. the poor gain at the expense of the rich.
d. as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost.
question
d. c + e
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.07.009_intro/999bf0cd-b415-4376-a4ec-a8fa683ac3fd.PNG
Refer to Exhibit 7-9. The deadweight loss of a tax is area:
a. a + b + d + f
b. a + b + c
c. d + e + f
d. c + e
Refer to Exhibit 7-9. The deadweight loss of a tax is area:
a. a + b + d + f
b. a + b + c
c. d + e + f
d. c + e
question
c. greater; greater.
answer
The more elastic the demand curve, the ____ will be the effect of a tax on the quantity exchanged and the ____ will be the welfare cost.
a. smaller; greater.
b. smaller; smaller.
c. greater; greater.
d. greater; smaller.
a. smaller; greater.
b. smaller; smaller.
c. greater; greater.
d. greater; smaller.
question
a. the quantity exchanged did not change as a result.
answer
A tax would not impose a welfare cost only if:
a. the quantity exchanged did not change as a result.
b. supply was unit elastic.
c. the demand curve was perfectly elastic.
d. supply was perfectly elastic
a. the quantity exchanged did not change as a result.
b. supply was unit elastic.
c. the demand curve was perfectly elastic.
d. supply was perfectly elastic
question
c. willingness to pay.
answer
The maximum price a buyer is willing to pay for a good is called:
a. efficiency.
b. cost.
c. willingness to pay.
d. equity.
a. efficiency.
b. cost.
c. willingness to pay.
d. equity.
question
b. a + b + d
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.07.011_intro/12c606f4-41f8-4241-9b90-4c6a0477dfc9.PNG
Refer to Exhibit 7-11. The consumer surplus after the price ceiling is area
a. a + b + c
b. a + b + d
c. a
d. a + b + d + f
Refer to Exhibit 7-11. The consumer surplus after the price ceiling is area
a. a + b + c
b. a + b + d
c. a
d. a + b + d + f
question
a. increases by area B + C
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.07.007_intro/be6421e2-3ed8-4b82-89a0-1b772fd11984.PNG
Refer to Exhibit 7-7. When the price falls from P2 to P1, consumer surplus
a. increases by area B + C
b. increases by area D + E
c. decreases by area C
d. decreases by area B + C
Refer to Exhibit 7-7. When the price falls from P2 to P1, consumer surplus
a. increases by area B + C
b. increases by area D + E
c. decreases by area C
d. decreases by area B + C
question
d. inelastic supply and demand curves.
answer
If the government wanted a tax to raise a great deal of revenue but not burden producers much, it would want to tax an industry with
a. inelastic supply and elastic demand.
b. elastic supply and demand curves.
c. elastic supply and inelastic demand.
d. inelastic supply and demand curves.
a. inelastic supply and elastic demand.
b. elastic supply and demand curves.
c. elastic supply and inelastic demand.
d. inelastic supply and demand curves.
question
a. the less the tax revenue raised and the greater the deadweight cost of the tax.
answer
Other things equal, for a given tax, if the demand curve is more elastic,
a. the less the tax revenue raised and the greater the deadweight cost of the tax.
b. the less the tax revenue raised and the smaller the deadweight cost of the tax.
c. the greater the tax revenue raised and the smaller the deadweight cost of the tax.
d. the greater the tax revenue raised and the greater the deadweight cost of the tax.
a. the less the tax revenue raised and the greater the deadweight cost of the tax.
b. the less the tax revenue raised and the smaller the deadweight cost of the tax.
c. the greater the tax revenue raised and the smaller the deadweight cost of the tax.
d. the greater the tax revenue raised and the greater the deadweight cost of the tax.
question
c. $1,500.
answer
Phil and Kelly have always wanted to take a cruise. Although willing to pay $5,000 for a Caribbean cruise for two, they were able to purchase a cruise vacation for two for $3,500. Their total consumer surplus amounted to:
a. $750.
b. $3,500.
c. $1,500.
d. $5,000.
a. $750.
b. $3,500.
c. $1,500.
d. $5,000.
question
b. reduce total revenue
answer
A decrease in demand will:
a. increase total revenue.
b. reduce total revenue.
c. increase total revenue only if demand is inelastic.
d. increase total revenue only if demand is elastic.
a. increase total revenue.
b. reduce total revenue.
c. increase total revenue only if demand is inelastic.
d. increase total revenue only if demand is elastic.
question
a. True
answer
If demand for lima beans is inelastic, a poor lima bean harvest could increase the total revenue of lima bean producers.
a. True
b. False
a. True
b. False
question
a. demand for flowers is perfectly inelastic.
answer
The government proposes a tax on flowers in order to boost its revenue. Consumers will bear all of this tax if the:
a. demand for flowers is perfectly inelastic.
b. demand for flowers is perfectly elastic.
c. demand for flowers is unit elastic.
d. supply of flowers is perfectly inelastic.
a. demand for flowers is perfectly inelastic.
b. demand for flowers is perfectly elastic.
c. demand for flowers is unit elastic.
d. supply of flowers is perfectly inelastic.
question
a. a 40% increase in purchases by customers.
answer
If the price elasticity of demand was 4.0 (in absolute terms), a 10% off sale would lead to:
a. a 40% increase in purchases by customers.
b. a 2.5% decrease in purchases by customers.
c. a 40% decrease in purchases by customers.
d. a 2.5% increase in purchases by customers.
a. a 40% increase in purchases by customers.
b. a 2.5% decrease in purchases by customers.
c. a 40% decrease in purchases by customers.
d. a 2.5% increase in purchases by customers.
question
c. increase the quantity exchanged but result in no change in the price.
answer
If the supply curve is perfectly elastic, then an increase in demand will:
a. increase the price but result in no change in the quantity exchanged.
b. decrease the price but not change the quantity exchanged.
c. increase the quantity exchanged but result in no change in the price.
d. increase both the price and the quantity exchanged.
a. increase the price but result in no change in the quantity exchanged.
b. decrease the price but not change the quantity exchanged.
c. increase the quantity exchanged but result in no change in the price.
d. increase both the price and the quantity exchanged.
question
b. increase the total revenue of goods that are substitutes for X.
answer
An increase in the price of good X due to a reduction in its supply will:
a. increase the total revenue of good X.
b. increase the total revenue of goods that are substitutes for X.
c. increase the total revenue of goods that are complements for X.
d. decrease the total revenue of good X.
a. increase the total revenue of good X.
b. increase the total revenue of goods that are substitutes for X.
c. increase the total revenue of goods that are complements for X.
d. decrease the total revenue of good X.
question
b. buyers of the good will incur most of the burden of the tax.
answer
When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,
a. the equilibrium quantity will increase.
b. buyers of the good will incur most of the burden of the tax.
c. buyers and sellers will each incur 50 percent of the burden of the tax.
d. sellers of the good will incur most of the burden of the tax.
a. the equilibrium quantity will increase.
b. buyers of the good will incur most of the burden of the tax.
c. buyers and sellers will each incur 50 percent of the burden of the tax.
d. sellers of the good will incur most of the burden of the tax.
question
d. rise as a result.
answer
Assume an industry initially in equilibrium has a price floor imposed at a price above the equilibrium price. Total revenue received by the producers from sales will:
a. rise as a result only if demand is elastic.
b. rise as a result only if demand is inelastic.
c. rise as a result only if supply is elastic.
d. rise as a result.
a. rise as a result only if demand is elastic.
b. rise as a result only if demand is inelastic.
c. rise as a result only if supply is elastic.
d. rise as a result.
question
d. insulin
answer
Which of the following goods would be most likely to feature an income elasticity of zero?
a. tickets to a championship football game
b. orange juice
c. cigarettes
d. insulin
a. tickets to a championship football game
b. orange juice
c. cigarettes
d. insulin
question
a. True
answer
If you and your business partner are trying to increase your total revenue, and you want a lower price than she does, it could be because you think the relevant demand curve is more elastic than your partner does.
a. True
b. False
a. True
b. False
question
b. inelastic
answer
A price cut will decrease the total revenue a firm receives if the demand for its product is:
a. unit elastic.
b. inelastic.
c. unit inelastic.
d. elastic.
a. unit elastic.
b. inelastic.
c. unit inelastic.
d. elastic.
question
a. True
answer
Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.
a. True
b. False
a. True
b. False
question
d. a normal good
answer
When demand and income move in the same direction, a good is said to be:
a. an inferior good.
b. a complementary good.
c. a substitute good.
d. a normal good
a. an inferior good.
b. a complementary good.
c. a substitute good.
d. a normal good
question
a. True
answer
An increase in the equilibrium price and the equilibrium quantity would be caused by an increase in demand.
a. True
b. False
a. True
b. False
question
a. True
answer
One common example of a price ceiling is rent control.
a. True
b. False
a. True
b. False
question
c. the price will rise, but the quantity traded could either rise or fall.
answer
If the supply of a product decreases by more than the demand increases:
a. the price will fall, but the quantity traded could either rise or fall.
b. the price will rise and the quantity traded will fall.
c. the price will rise, but the quantity traded could either rise or fall.
d. the quantity traded will rise, but the price could either rise or fall.
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a. the price will fall, but the quantity traded could either rise or fall.
b. the price will rise and the quantity traded will fall.
c. the price will rise, but the quantity traded could either rise or fall.
d. the quantity traded will rise, but the price could either rise or fall.
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question
b. (iv) only
answer
A nonbinding price floor
i.
causes a surplus.
ii.
causes a shortage.
iii.
is set at a price above the equilibrium price.
iv.
is set at a price below the equilibrium price.
a. (ii) and (iv) only
b. (iv) only
c. (iii) only
d. (i) and (iii) only
i.
causes a surplus.
ii.
causes a shortage.
iii.
is set at a price above the equilibrium price.
iv.
is set at a price below the equilibrium price.
a. (ii) and (iv) only
b. (iv) only
c. (iii) only
d. (i) and (iii) only
question
c. Point A; Point F
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.05.007_intro/12204c35-f8e1-43f5-aef7-c1f505fdbd56.JPEG
Refer to Exhibit 5-7. The movement from ____ to ____ is consistent with a successful advertising campaign that claims wool keeps you warm.
a. Point A; Point H
b. Point A; Point D
c. Point A; Point F
d. Point A; Point B
Refer to Exhibit 5-7. The movement from ____ to ____ is consistent with a successful advertising campaign that claims wool keeps you warm.
a. Point A; Point H
b. Point A; Point D
c. Point A; Point F
d. Point A; Point B
question
b. the quantity of lettuce supplied will increase.
answer
Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases:
a. a surplus of lettuce will be created.
b. the quantity of lettuce supplied will increase.
c. a shortage of lettuce will be created.
d. the quantity of lettuce traded remains the same.
a. a surplus of lettuce will be created.
b. the quantity of lettuce supplied will increase.
c. a shortage of lettuce will be created.
d. the quantity of lettuce traded remains the same.
question
a. True
answer
A price floor is a legal minimum on the price at which a good or service can be sold.
a. True
b. False
a. True
b. False
question
a. True
answer
A price ceiling set above the equilibrium price is not binding.
a. True
b. False
a. True
b. False
question
a. prices would fall.
answer
If tastes for a good decreased and the price of a substitute good decreased at the same time, as a result:
a. prices would fall.
b. we would not know which direction either prices or quantities exchanged would be altered without more information.
c. larger quantities to be exchanged.
d. prices would rise.
a. prices would fall.
b. we would not know which direction either prices or quantities exchanged would be altered without more information.
c. larger quantities to be exchanged.
d. prices would rise.
question
c. a decrease in equilibrium price and an increase in equilibrium quantity of homes sold.
answer
If many more home sellers and builders have become more eager to sell their homes, we would expect to see:
a. a decrease in equilibrium price and a decrease in equilibrium quantity of homes sold.
b. an increase in equilibrium price and an increase in equilibrium quantity of homes sold.
c. a decrease in equilibrium price and an increase in equilibrium quantity of homes sold.
d. an increase in equilibrium price and a decrease in equilibrium quantity of homes sold.
a. a decrease in equilibrium price and a decrease in equilibrium quantity of homes sold.
b. an increase in equilibrium price and an increase in equilibrium quantity of homes sold.
c. a decrease in equilibrium price and an increase in equilibrium quantity of homes sold.
d. an increase in equilibrium price and a decrease in equilibrium quantity of homes sold.
question
c. the imposition of a price floor above the equilibrium price will decrease the quantity demanded.
answer
Starting from an equilibrium position,
a. the imposition of a price floor above the equilibrium price will increase the quantity exchanged.
b. the imposition of a price floor below the equilibrium price will increase the quantity demanded.
c. the imposition of a price floor above the equilibrium price will decrease the quantity demanded.
d. the imposition of a price floor below the equilibrium price will decrease the quantity exchanged.
a. the imposition of a price floor above the equilibrium price will increase the quantity exchanged.
b. the imposition of a price floor below the equilibrium price will increase the quantity demanded.
c. the imposition of a price floor above the equilibrium price will decrease the quantity demanded.
d. the imposition of a price floor below the equilibrium price will decrease the quantity exchanged.
question
c. there will be no effect on the market price or quantity sold.
answer
If a price floor is not binding, then
a. the market will be less efficient than it would be without the price floor.
b. there will be a shortage in the market.
c. there will be no effect on the market price or quantity sold.
d. there will be a surplus in the market.
a. the market will be less efficient than it would be without the price floor.
b. there will be a shortage in the market.
c. there will be no effect on the market price or quantity sold.
d. there will be a surplus in the market.
question
b. False
answer
A price ceiling set below the equilibrium price is nonbinding.
a. True
b. False
a. True
b. False
question
c. Supply will not change.
answer
How will a decrease in price tend to affect supply?
a. Supply will decrease.
b. Supply will increase.
c. Supply will not change.
d. It is uncertain
a. Supply will decrease.
b. Supply will increase.
c. Supply will not change.
d. It is uncertain
question
a. True
answer
If an increase in the price of Good A causes an increase in the demand for Good B, Goods A and B are said to be substitutes.
a. True
b. False
a. True
b. False
question
d. peanut butter and jelly are complements.
answer
The price of peanut butter falls and as a result the demand for jelly increases. We can conclude that:
a. peanut butter and jelly are substitutes.
b. the marginal value of jelly is greater than the marginal value of peanut butter.
c. peanut butter and jelly are inferior goods.
d. peanut butter and jelly are complements.
a. peanut butter and jelly are substitutes.
b. the marginal value of jelly is greater than the marginal value of peanut butter.
c. peanut butter and jelly are inferior goods.
d. peanut butter and jelly are complements.
question
b. increase in the price of the product.
answer
All of the following would shift a product's demand curve except a(n):
a. increase in the price of a complement.
b. increase in the price of the product.
c. increase in the price of a substitute.
d. decrease in consumer income.
a. increase in the price of a complement.
b. increase in the price of the product.
c. increase in the price of a substitute.
d. decrease in consumer income.
question
d. The price of olives rises.
answer
Which of the following events would cause an upward movement along the demand curve for olives?
a. The price of pickles decreases, and pickles are a substitute for olives.
b. The number of people who purchase olives decreases.
c. Consumer income decreases, and olives are a normal good.
d. The price of olives rises.
a. The price of pickles decreases, and pickles are a substitute for olives.
b. The number of people who purchase olives decreases.
c. Consumer income decreases, and olives are a normal good.
d. The price of olives rises.
question
d. Andy's demand for beer to increase.
answer
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
a. Andy's quantity of pizza demanded to decrease.
b. Andy's demand for pizza to decrease.
c. Andy's demand for pizza to increase.
d. Andy's demand for beer to increase.
a. Andy's quantity of pizza demanded to decrease.
b. Andy's demand for pizza to decrease.
c. Andy's demand for pizza to increase.
d. Andy's demand for beer to increase.
question
d. will buy at various prices.
answer
.In economics, the demand for a good refers to the amount of the good people:
a. will buy at alternative income levels.
b. would like to have if the good were free.
c. need to achieve a minimum standard of living.
d. will buy at various prices.
a. will buy at alternative income levels.
b. would like to have if the good were free.
c. need to achieve a minimum standard of living.
d. will buy at various prices.
question
a. decrease in quantity demanded.
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.04.004_intro/67f22be0-61cb-4fd7-88d7-c23165360395.PNG
Refer to Exhibit 4-4. A change from Point A to Point B represents a(n):
a. decrease in quantity demanded.
b. decrease in demand.
c. increase in quantity demanded.
d. increase in demand.
Refer to Exhibit 4-4. A change from Point A to Point B represents a(n):
a. decrease in quantity demanded.
b. decrease in demand.
c. increase in quantity demanded.
d. increase in demand.
question
c. At equilibrium, quantity demanded equals quantity supplied.
answer
Which of the following is the correct way to describe equilibrium in a market?
a. At equilibrium, market forces no longer apply.
b. At equilibrium, the "fairest" price for output is achieved.
c. At equilibrium, quantity demanded equals quantity supplied.
d. At equilibrium, demand equals supply.
a. At equilibrium, market forces no longer apply.
b. At equilibrium, the "fairest" price for output is achieved.
c. At equilibrium, quantity demanded equals quantity supplied.
d. At equilibrium, demand equals supply.
question
a. True
answer
A market is not really a place but rather the process of buyers and sellers exchanging goods and services.
a. True
b. False
a. True
b. False
question
a. increases in demand and decreases in supply.
answer
Upward shifts are
a. increases in demand and decreases in supply.
b. decreases in both demand and supply.
c. increases in supply and decreases in demand.
d. increases in both demand and supply.
a. increases in demand and decreases in supply.
b. decreases in both demand and supply.
c. increases in supply and decreases in demand.
d. increases in both demand and supply.
question
b. Used clothing.
answer
Which of the following is most likely to be an inferior good?
a. An Ivy League education.
b. Used clothing.
c. Porsches.
d. Lobster.
a. An Ivy League education.
b. Used clothing.
c. Porsches.
d. Lobster.
question
d. increase the supply of wheat.
answer
Other things constant, a decrease in the price of fertilizer will:
a. decrease the supply of wheat.
b. decrease the demand for wheat.
c. increase the demand for wheat.
d. increase the supply of wheat.
a. decrease the supply of wheat.
b. decrease the demand for wheat.
c. increase the demand for wheat.
d. increase the supply of wheat.
question
a. an increase in the supply of automobiles.
answer
Steel producers offer to sell steel to U.S. auto producers at a much lower price than in the past. As a result one would expect:
a. an increase in the supply of automobiles.
b. a decrease in the supply of automobiles.
c. no change in the supply of automobiles.
d. an increase in the demand for automobiles.
a. an increase in the supply of automobiles.
b. a decrease in the supply of automobiles.
c. no change in the supply of automobiles.
d. an increase in the demand for automobiles.
question
c. increase the demand for tea.
answer
If bad weather destroyed half of the current coffee crop, ceteris paribus, it would:
a. decrease the demand for coffee.
b. decrease the demand for tea.
c. increase the demand for tea.
d. increase the demand for coffee.
a. decrease the demand for coffee.
b. decrease the demand for tea.
c. increase the demand for tea.
d. increase the demand for coffee.
question
b. increase in demand
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.04.004_intro/67f22be0-61cb-4fd7-88d7-c23165360395.PNG
Refer to Exhibit 4-4. A change from Point A to Point D represents a(n):
a. decrease in quantity demanded.
b. increase in demand.
c. decrease in demand.
d. increase in quantity demanded.
Refer to Exhibit 4-4. A change from Point A to Point D represents a(n):
a. decrease in quantity demanded.
b. increase in demand.
c. decrease in demand.
d. increase in quantity demanded.
question
c. an increase in the price of lumber used to construct houses
answer
Which of the following is most likely a topic of discussion in a microeconomics course?
a. an increase in the rate of inflation
b. an increase in the number of jobless individuals filing unemployment claims
c. an increase in the price of lumber used to construct houses
d. a decrease in the share of national income paid to the government in taxes
a. an increase in the rate of inflation
b. an increase in the number of jobless individuals filing unemployment claims
c. an increase in the price of lumber used to construct houses
d. a decrease in the share of national income paid to the government in taxes
question
c. scarcity.
answer
The fundamental economic problem is:
a. unemployment.
b. poverty.
c. scarcity.
d. inflation.
a. unemployment.
b. poverty.
c. scarcity.
d. inflation.
question
d. generalizing from the individual to the whole.
answer
The fallacy of composition is essentially the error of:
a. confusing association with causation.
b. omitting relevant variables from an economic model.
c. confusing normative economics with positive economics.
d. generalizing from the individual to the whole.
a. confusing association with causation.
b. omitting relevant variables from an economic model.
c. confusing normative economics with positive economics.
d. generalizing from the individual to the whole.
question
a. It is likely that variables other than the price and quantity of cars demanded were changing.
answer
A theory asserts that consumers will purchase less of a good at higher prices than they will at lower prices, ceteris paribus. However, when the average price of cars increased throughout the 1990s, more cars were purchased. Which of the following best explains the apparent conflict between theory and data?
a. It is likely that variables other than the price and quantity of cars demanded were changing.
b. The theory must be invalid.
c. The theory is valid. However, the price and quantity data gathered by researchers was clearly measured incorrectly.
d. The ceteris paribus assumption is valid.
a. It is likely that variables other than the price and quantity of cars demanded were changing.
b. The theory must be invalid.
c. The theory is valid. However, the price and quantity data gathered by researchers was clearly measured incorrectly.
d. The ceteris paribus assumption is valid.
question
c. holding other things constant.
answer
"Ceteris paribus" means:
a. what is true for the individual must be true for the whole.
b. all relevant details are included.
c. holding other things constant.
d. if events A and B occur together, one must cause the other.
a. what is true for the individual must be true for the whole.
b. all relevant details are included.
c. holding other things constant.
d. if events A and B occur together, one must cause the other.
question
b. limited resources in order to best satisfy our unlimited desires.
answer
By the study of "scarcity," an economist means how we best utilize our:
a. limited resources in order to promote full employment and price stability.
b. limited resources in order to best satisfy our unlimited desires.
c. unlimited desires in order to best use our unlimited resources.
d. unlimited resources to best satisfy our unlimited desires.
a. limited resources in order to promote full employment and price stability.
b. limited resources in order to best satisfy our unlimited desires.
c. unlimited desires in order to best use our unlimited resources.
d. unlimited resources to best satisfy our unlimited desires.
question
a. how limited resources are allocated to satisfy unlimited wants.
answer
Economics is primarily the study of:
a. how limited resources are allocated to satisfy unlimited wants.
b. how firms compete for profits in the marketplace.
c. human greed.
d. how successful investors make money in the stock market.
a. how limited resources are allocated to satisfy unlimited wants.
b. how firms compete for profits in the marketplace.
c. human greed.
d. how successful investors make money in the stock market.
question
b. Income should be redistributed from the top 2% of wage earners to the lower income brackets.
answer
Which of the following is a normative statement?
a. Running government budget deficits leads to higher market interest rates.
b. Income should be redistributed from the top 2% of wage earners to the lower income brackets.
c. An increase in tariffs will increase the domestic prices paid by consumers.
d. An increase in taxes will cause higher unemployment.
a. Running government budget deficits leads to higher market interest rates.
b. Income should be redistributed from the top 2% of wage earners to the lower income brackets.
c. An increase in tariffs will increase the domestic prices paid by consumers.
d. An increase in taxes will cause higher unemployment.
question
b. False
answer
Since resources are abundant, we do not have to make choices about their use.
a. True
b. False
a. True
b. False
question
a. a normative economic statement.
answer
"The minimum wage should be increased so that low-income workers can afford to feed their families." This is an example of:
a. a normative economic statement.
b. a negative economic statement.
c. a positive economic statement.
d. the fallacy of composition.
a. a normative economic statement.
b. a negative economic statement.
c. a positive economic statement.
d. the fallacy of composition.
question
c. two sets of phenomena may be related, but one does not necessarily cause the other.
answer
In the discussion of correlation and causation, correlation means:
a. that if a groundhog sees his shadow in February, this phenomena causes there to be six more weeks of bad weather.
b. that when two phenomena are repeatedly observed together, one must cause the other.
c. two sets of phenomena may be related, but one does not necessarily cause the other.
d. two sets of phenomena are not related and one may in fact cause the other.
a. that if a groundhog sees his shadow in February, this phenomena causes there to be six more weeks of bad weather.
b. that when two phenomena are repeatedly observed together, one must cause the other.
c. two sets of phenomena may be related, but one does not necessarily cause the other.
d. two sets of phenomena are not related and one may in fact cause the other.
question
a. a + b + d
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.13.009_intro/c161a23b-7645-44ae-9be1-7eacda3e6b57.PNG
Refer to Exhibit 13-7. In single price monopoly, total welfare is area:
a. a + b + d
b. b + d
c. zero
d. a
Refer to Exhibit 13-7. In single price monopoly, total welfare is area:
a. a + b + d
b. b + d
c. zero
d. a
question
a. True
answer
A price-discriminating monopoly firm will tend to charge a higher price to customers with a greater willingness to pay than it does to customers with a lower willingness to pay.
a. True
b. False
a. True
b. False
question
a. price discrimination
answer
The practice of selling a product to different customers at different prices when marginal cost is the same is known as:
a. price discrimination.
b. monopoly pricing.
c. arbitrage.
d. price segregation.
a. price discrimination.
b. monopoly pricing.
c. arbitrage.
d. price segregation.
question
c. None of the above are correct.
answer
In the short run, a monopolist:
a. never earns an accounting profit.
b. never earns an economic profit.
c. None of the above are correct.
d. always earns an economic profit.
a. never earns an accounting profit.
b. never earns an economic profit.
c. None of the above are correct.
d. always earns an economic profit.
question
b. To sell more units, the monopolist must reduce price on all units sold.
answer
Which of the following best explains why marginal revenue for a monopolist is less than the sales price?
a. As the monopolist expands output, the average total cost of production declines.
b. To sell more units, the monopolist must reduce price on all units sold.
c. The monopolist charges each consumer the highest possible price.
d. When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.
a. As the monopolist expands output, the average total cost of production declines.
b. To sell more units, the monopolist must reduce price on all units sold.
c. The monopolist charges each consumer the highest possible price.
d. When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.
question
a. in perfect competition MC = P, while a monopolist produces where P > MC.
answer
Perfectly competitive firms and monopolists are different because
a. in perfect competition MC = P, while a monopolist produces where P > MC.
b. in perfect competition P > MC, while a monopolist produces where MC = P.
c. in perfect competition MC > P, while a monopolist produces where MC = P.
d. in perfect competition MC = P, while a monopolist produces where MC > P.
a. in perfect competition MC = P, while a monopolist produces where P > MC.
b. in perfect competition P > MC, while a monopolist produces where MC = P.
c. in perfect competition MC > P, while a monopolist produces where MC = P.
d. in perfect competition MC = P, while a monopolist produces where MC > P.
question
a. The monopolist may earn long-run economic profit; firms in perfectly competitive markets cannot.
answer
Which of the following accurately describes a major difference between a monopolist and firms in perfectly competitive markets?
a. The monopolist may earn long-run economic profit; firms in perfectly competitive markets cannot.
b. The monopolist may earn short-run profit; firms in perfectly competitive markets cannot.
c. The monopolist is a price taker; firms in other markets are price searchers.
d. The monopolist maximizes profit; firms in perfectly competitive markets maximize sales.
a. The monopolist may earn long-run economic profit; firms in perfectly competitive markets cannot.
b. The monopolist may earn short-run profit; firms in perfectly competitive markets cannot.
c. The monopolist is a price taker; firms in other markets are price searchers.
d. The monopolist maximizes profit; firms in perfectly competitive markets maximize sales.
question
b. The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
answer
Graphically which of the following is true for a monopoly?
a. The marginal revenue curve lies above the demand curve and is flatter than the demand curve.
b. The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
c. The marginal revenue curve lies above the demand curve and is steeper than the demand curve.
d. The marginal revenue curve lies below the demand curve and is flatter than the demand curve.
a. The marginal revenue curve lies above the demand curve and is flatter than the demand curve.
b. The marginal revenue curve lies below the demand curve and is steeper than the demand curve.
c. The marginal revenue curve lies above the demand curve and is steeper than the demand curve.
d. The marginal revenue curve lies below the demand curve and is flatter than the demand curve.
question
a. average cost of production is lowest when only one firm produces the entire industry output.
answer
A natural monopoly exists if:
a. average cost of production is lowest when only one firm produces the entire industry output.
b. a firm has a patent or copyright.
c. one firm controls the supply of an essential input used by the industry.
d. several former competitors merge to become the only producer in the industry.
a. average cost of production is lowest when only one firm produces the entire industry output.
b. a firm has a patent or copyright.
c. one firm controls the supply of an essential input used by the industry.
d. several former competitors merge to become the only producer in the industry.
question
d. DEQ10
answer
http://sjc.cengagenow.com/ilrn/books/se1em07r/se1em07r.13.005_intro/ecbcf90c-78a3-49f1-94a7-9cbfd9b6143c.PNG
Refer to Exhibit 13-5. What area measures the monopolist's total revenue?
a. CHQ30
b. AGQ10
c. BFQ10
d. DEQ10
Refer to Exhibit 13-5. What area measures the monopolist's total revenue?
a. CHQ30
b. AGQ10
c. BFQ10
d. DEQ10
question
d. is characterized by all of the above.
answer
Marginal cost regulation of a natural monopoly:
a. generates economic losses for the seller.
b. necessitates a subsidy payment to the firm.
c. imposes a price that is less than average total cost.
d. is characterized by all of the above.
a. generates economic losses for the seller.
b. necessitates a subsidy payment to the firm.
c. imposes a price that is less than average total cost.
d. is characterized by all of the above.
question
a. is $3.
answer
If the demand curve facing a monopoly was 1 unit at $7, 2 units at $6, 3 units at $5, 4 units at $4, and 5 units at $3, the marginal revenue from selling the third unit of output:
a. is $3.
b. is $4.
c. is $5.
d. is $1.
a. is $3.
b. is $4.
c. is $5.
d. is $1.
question
b. have a greater willingness to pay than other demanders.
answer
A price-discriminating monopolist will tend to charge a higher price to senior citizens if it believes that senior citizens:
a. have a lower willingness to pay than other demanders.
b. have a greater willingness to pay than other demanders.
c. have horizontal demand curves.
d. have very elastic demand curves.
a. have a lower willingness to pay than other demanders.
b. have a greater willingness to pay than other demanders.
c. have horizontal demand curves.
d. have very elastic demand curves.
question
d. large barriers to entry
answer
Which of the following is a characteristic of a monopoly?
a. a large number of sellers
b. price taking firms
c. homogeneous products
d. large barriers to entry
a. a large number of sellers
b. price taking firms
c. homogeneous products
d. large barriers to entry
question
b. have a lower willingness to pay than other demanders.
answer
A price-discriminating monopolist will tend to charge a lower price to students if it believes that students:
a. have very elastic demand curves.
b. have a lower willingness to pay than other demanders.
c. have nearly vertical demand curves.
d. have a greater willingness to pay than other demanders.
a. have very elastic demand curves.
b. have a lower willingness to pay than other demanders.
c. have nearly vertical demand curves.
d. have a greater willingness to pay than other demanders.
question
d. is called a natural monopoly.
answer
A market structure in which only one firm survives because of economies of scale:
a. is called a government monopoly.
b. is called a patented monopoly.
c. is called a structural monopoly.
d. is called a natural monopoly.
a. is called a government monopoly.
b. is called a patented monopoly.
c. is called a structural monopoly.
d. is called a natural monopoly.
question
a. True
answer
The monopolist, like the perfect competitor, maximizes profits at the output where marginal revenue equals marginal cost.
a. True
b. False
a. True
b. False
question
b. marginal revenue exceeds price
answer
Which of the following is inconsistent with a monopoly?
a. a U-shaped average total cost curve
b. marginal revenue exceeds price
c. a single seller
d. a downward-sloping demand curve
a. a U-shaped average total cost curve
b. marginal revenue exceeds price
c. a single seller
d. a downward-sloping demand curve
question
A) an industry consisting of a single seller
answer
Pure monopoly is defined as
A) an industry consisting of a single seller
B) a market structure that involves many substitute products.
C) a market in which many rival firms compete for sales.
D) a market structure consisting of a single buyer.
A) an industry consisting of a single seller
B) a market structure that involves many substitute products.
C) a market in which many rival firms compete for sales.
D) a market structure consisting of a single buyer.
question
E) all of the above are true.
answer
For a true, or pure, monopoly,
A) there is only one seller of the product.
B) no close substitutes are available.
C) the firm and the industry are the same.
D) it must be virtually impossible for other firms to overcome barriers to entry.
E) all of the above are true.
A) there is only one seller of the product.
B) no close substitutes are available.
C) the firm and the industry are the same.
D) it must be virtually impossible for other firms to overcome barriers to entry.
E) all of the above are true.
question
D) free entry and exit
answer
Which of the following is inconsistent with monopoly?
A) a single seller
B) economies of scale
C) MR < P
D) free entry and exit
E) selling in the elastic portion of the demand curve in order to maximize profits
A) a single seller
B) economies of scale
C) MR < P
D) free entry and exit
E) selling in the elastic portion of the demand curve in order to maximize profits
question
E) all of the above
answer
Which of the following is potentially a barrier to entry into a product market?
A) patent protection on the design of the product
B) economies of scale in the product market
C) government licensing of the product's producers
D) the control of a crucial input necessary to produce the product
E) all of the above
A) patent protection on the design of the product
B) economies of scale in the product market
C) government licensing of the product's producers
D) the control of a crucial input necessary to produce the product
E) all of the above
question
D) All of the above statements are true.
answer
Which of the following is true?
A) The monopolist's marginal revenue will always be less than the price because of its downward-sloping demand curve.
B) In order to sell more output, the monopolist must accept a lower price on all units sold.
C) The monopolist will receive additional revenue from the sale of an additional new unit but will receive less revenue on all of the units it was previously selling as well.
D) All of the above statements are true.
A) The monopolist's marginal revenue will always be less than the price because of its downward-sloping demand curve.
B) In order to sell more output, the monopolist must accept a lower price on all units sold.
C) The monopolist will receive additional revenue from the sale of an additional new unit but will receive less revenue on all of the units it was previously selling as well.
D) All of the above statements are true.
question
D) all of the above are true.
answer
In monopoly,
A) the firm's demand curve is the market demand curve for the product.
B) the marginal revenue is less than the price.
C) the firm can set its price anywhere but will
enhance its profits by raising or lowering the price, depending on the circumstances.
D) all of the above are true.
A) the firm's demand curve is the market demand curve for the product.
B) the marginal revenue is less than the price.
C) the firm can set its price anywhere but will
enhance its profits by raising or lowering the price, depending on the circumstances.
D) all of the above are true.
question
C) cannot set both its price and the quantity sold; if the monopolist reduces output, the price will rise, and if the monopolist expands output, the price will fall.
answer
In monopoly, the firm
A) is a price taker.
B) will only operate on the bottom half of its demand curve.
C) cannot set both its price and the quantity sold; if the monopolist reduces output, the price will rise, and if the monopolist expands output, the price will fall.
D) All of the above are true.
A) is a price taker.
B) will only operate on the bottom half of its demand curve.
C) cannot set both its price and the quantity sold; if the monopolist reduces output, the price will rise, and if the monopolist expands output, the price will fall.
D) All of the above are true.
question
B) downward sloping.
answer
The monopolist's demand curve is
A) upward sloping.
B) downward sloping.
C) horizontal, like the perfectly competitive firm's demand curve.
D) The monopolist does not have a demand curve.
A) upward sloping.
B) downward sloping.
C) horizontal, like the perfectly competitive firm's demand curve.
D) The monopolist does not have a demand curve.
question
B) output where marginal cost equals marginal revenue.
answer
A profit-maximizing monopolist sets
A) the product price where marginal cost equals marginal revenue.
B) output where marginal cost equals marginal revenue.
C) output where marginal cost equals average revenue.
D) output where demand equals average total cost.
E) price equal to the highest dollar amount that any customer is willing to pay.
A) the product price where marginal cost equals marginal revenue.
B) output where marginal cost equals marginal revenue.
C) output where marginal cost equals average revenue.
D) output where demand equals average total cost.
E) price equal to the highest dollar amount that any customer is willing to pay.
question
D) all of the above are true.
answer
For a monopolist,
A) its demand curve is downward sloping.
B) its marginal revenue is less than price.
C) existing economic profits can be sustained over time.
D) all of the above are true.
A) its demand curve is downward sloping.
B) its marginal revenue is less than price.
C) existing economic profits can be sustained over time.
D) all of the above are true.
question
A) raise price and decrease output.
answer
If a profit-maximizing monopolist is currently charging a price on the inelastic portion of its demand curve, it should
A) raise price and decrease output.
B) lower price and increase output.
C) reduce both output and price.
D) hold output constant and raise price.
E) do none of the above.
A) raise price and decrease output.
B) lower price and increase output.
C) reduce both output and price.
D) hold output constant and raise price.
E) do none of the above.
question
B) demand was unit elastic.
answer
If a monopolist had a zero marginal cost of production, it would maximize profits by choosing to produce a quantity where
A) demand was inelastic.
B) demand was unit elastic.
C) demand was elastic.
D) It is impossible to determine where along a demand curve such a monopolist would choose to produce.
A) demand was inelastic.
B) demand was unit elastic.
C) demand was elastic.
D) It is impossible to determine where along a demand curve such a monopolist would choose to produce.
question
B) The monopolist always earns an economic profit.
answer
Which of the following is not true about a profit-maximizing monopolist?
A) The monopolist faces the downward-sloping market demand curve.
B) The monopolist always earns an economic profit.
C) The price of output exceeds marginal revenue.
D) The monopolist chooses output where marginal revenue equals marginal cost.
E) All of the above are true.
A) The monopolist faces the downward-sloping market demand curve.
B) The monopolist always earns an economic profit.
C) The price of output exceeds marginal revenue.
D) The monopolist chooses output where marginal revenue equals marginal cost.
E) All of the above are true.
question
E) (a) and (b) are true of both of them, but not (c).
answer
Monopolists are like perfectly competitive firms in that
A) both maximize profits at the output level where marginal revenue equals marginal cost.
B) both could be earning either profits or losses in the short run.
C) both are in industries with downward-sloping demand curves.
D) all of the above are true of both of them.
E) (a) and (b) are true of both of them, but not (c).
A) both maximize profits at the output level where marginal revenue equals marginal cost.
B) both could be earning either profits or losses in the short run.
C) both are in industries with downward-sloping demand curves.
D) all of the above are true of both of them.
E) (a) and (b) are true of both of them, but not (c).
question
A) a monopolist's price is greater than marginal cost.
answer
Monopoly is unlike perfect competition in that
A) a monopolist's price is greater than marginal cost.
B) there are no barriers to entry into a monopoly industry.
C) a monopolist earns an economic profit only if its price is greater than ATC.
D) all of the preceding are ways in which monopoly is unlike perfect competition.
E) (a) and (b), but not (c), are ways in which monopoly is unlike perfect competition.
A) a monopolist's price is greater than marginal cost.
B) there are no barriers to entry into a monopoly industry.
C) a monopolist earns an economic profit only if its price is greater than ATC.
D) all of the preceding are ways in which monopoly is unlike perfect competition.
E) (a) and (b), but not (c), are ways in which monopoly is unlike perfect competition.
question
B) both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost.
answer
A price-taking firm and a monopolist are alike in that
A) price equals marginal revenue for both.
B) both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost.
C) price exceeds marginal cost at the profit-maximizing level of output for both.
D) in the long run, both earn zero economic profits.
A) price equals marginal revenue for both.
B) both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost.
C) price exceeds marginal cost at the profit-maximizing level of output for both.
D) in the long run, both earn zero economic profits.
question
B) Marginal revenue is equal to price.
answer
Which of the following is true of perfect competition but not true of monopoly?
A) The firm's average total cost curve is U-shaped.
B) Marginal revenue is equal to price.
C) A profit-maximizing firm chooses output where marginal revenue equals marginal cost.
D) Profits may exist in the short run.
A) The firm's average total cost curve is U-shaped.
B) Marginal revenue is equal to price.
C) A profit-maximizing firm chooses output where marginal revenue equals marginal cost.
D) Profits may exist in the short run.
question
B) They reduce the price below what would be charged in perfect competition.
answer
Objections to monopolies do not include which of the following?
A) They reduce output below the efficient level of output that would be produced in perfect competition.
B) They reduce the price below what would be charged in perfect competition.
C) They charge a price that is greater than marginal cost.
D) They create a welfare cost.
E) All of the preceding are objections to monopolies.
A) They reduce output below the efficient level of output that would be produced in perfect competition.
B) They reduce the price below what would be charged in perfect competition.
C) They charge a price that is greater than marginal cost.
D) They create a welfare cost.
E) All of the preceding are objections to monopolies.
question
E) All of the above statements are true.
answer
Which of the following statements is true?
A) Monopoly results in smaller output and a higher price than would be the case under perfect competition.
B) The monopolist produces at an output where P > MC and the marginal value to society of the last unit produced is greater than its marginal cost.
C) The monopoly is not producing enough output from society's standpoint.
D) Monopoly may lead to greater concentration of economic power and could retard innovation.
E) All of the above statements are true.
A) Monopoly results in smaller output and a higher price than would be the case under perfect competition.
B) The monopolist produces at an output where P > MC and the marginal value to society of the last unit produced is greater than its marginal cost.
C) The monopoly is not producing enough output from society's standpoint.
D) Monopoly may lead to greater concentration of economic power and could retard innovation.
E) All of the above statements are true.
question
A) one firm can produce the entire industry output at a lower average cost than can two or more firms.
answer
A natural monopoly is defined as an industry in which
A) one firm can produce the entire industry output at a lower average cost than can two or more firms.
B) a single firm controls crucial inputs to the production process.
C) one firm is especially large relative to other firms that could enter the industry.
D) a single seller exists as a result of patent protection.
A) one firm can produce the entire industry output at a lower average cost than can two or more firms.
B) a single firm controls crucial inputs to the production process.
C) one firm is especially large relative to other firms that could enter the industry.
D) a single seller exists as a result of patent protection.
question
C) suffer an economic loss.
answer
If regulators set a price according to marginal cost pricing, the firm will
A) earn positive economic profits.
B) make zero economic profits.
C) suffer an economic loss.
D) earn the same level of profits as it would absent regulation.
A) earn positive economic profits.
B) make zero economic profits.
C) suffer an economic loss.
D) earn the same level of profits as it would absent regulation.
question
B) result in a less than socially efficient level of output.
answer
Average cost pricing for a natural monopoly will
A) result in the socially efficient level of output.
B) result in a less than socially efficient level of output.
C) result in a greater than socially efficient level of output.
D) result in the firm suffering economic losses.
E) result in the firm earning economic profit.
A) result in the socially efficient level of output.
B) result in a less than socially efficient level of output.
C) result in a greater than socially efficient level of output.
D) result in the firm suffering economic losses.
E) result in the firm earning economic profit.
question
E) all of the preceding are true.
answer
Under average cost pricing by a natural monopoly,
A) price is greater than marginal cost.
B) a welfare cost will be incurred.
C) the producer will earn a normal rate of return.
D) a producer experiences little or no incentive to hold down costs.
E) all of the preceding are true.
A) price is greater than marginal cost.
B) a welfare cost will be incurred.
C) the producer will earn a normal rate of return.
D) a producer experiences little or no incentive to hold down costs.
E) all of the preceding are true.
question
D) All of the preceding are limitations faced by regulators implementing average cost pricing
answer
Which of the following is not a limitation that regulators face when they implement average cost pricing?
A) Average cost pricing provides little or no incentive for firms to keep costs down.
B) The accurate calculation of a firm's costs is difficult.
C) Decisions are political and often influenced by special interests.
D) All of the preceding are limitations faced by regulators implementing average cost pricing.
A) Average cost pricing provides little or no incentive for firms to keep costs down.
B) The accurate calculation of a firm's costs is difficult.
C) Decisions are political and often influenced by special interests.
D) All of the preceding are limitations faced by regulators implementing average cost pricing.
question
D) Both (a) and (b) are true.
answer
Which of the following statements is true?
A) Antitrust policies are government policies designed to reduce the profitability of a monopoly and push production closer to the social optimum.
B) Antitrust laws can promote greater competition.
C) Average cost pricing sets price equal to marginal cost, where the demand curve intersects the marginal cost curve.
D) Both (a) and (b) are true.
A) Antitrust policies are government policies designed to reduce the profitability of a monopoly and push production closer to the social optimum.
B) Antitrust laws can promote greater competition.
C) Average cost pricing sets price equal to marginal cost, where the demand curve intersects the marginal cost curve.
D) Both (a) and (b) are true.
question
D) do all of the preceding.
answer
A price-discriminating monopolist will
A) price where marginal revenue equals marginal cost for each different group of demanders.
B) charge a higher price to those with a greater willingness to pay (the more inelastic demanders).
C) have to face customers who have a difficult time reselling the good to others who were charged more.
D) do all of the preceding.
A) price where marginal revenue equals marginal cost for each different group of demanders.
B) charge a higher price to those with a greater willingness to pay (the more inelastic demanders).
C) have to face customers who have a difficult time reselling the good to others who were charged more.
D) do all of the preceding.
question
A) more elastic than that of other demanders.
answer
A price-discriminating monopolist will tend to charge a lower price to students if it believes that student demand is
A) more elastic than that of other demanders.
B) more inelastic than that of other demanders.
C) unit elastic.
D) graphically represented by a vertical curve.
A) more elastic than that of other demanders.
B) more inelastic than that of other demanders.
C) unit elastic.
D) graphically represented by a vertical curve.
question
A) They could make greater profits by charging everyone a higher, uniform price.
answer
Which of the following is not true of successful price discriminators?
A) They could make greater profits by charging everyone a higher, uniform price.
B) Their customers must differ in their willingness to pay.
C) Their customers must have difficulty reselling the good to other customers.
D) They must have monopoly power.
A) They could make greater profits by charging everyone a higher, uniform price.
B) Their customers must differ in their willingness to pay.
C) Their customers must have difficulty reselling the good to other customers.
D) They must have monopoly power.
question
A) it can separate willingness to pay across customers.
answer
Price discrimination may be a rational strategy for a profit-maximizing monopolist when
A) it can separate willingness to pay across customers.
B) it has a substantial opportunity for reselling across market segments.
C) consumers are unable to be segmented into identifiable markets.
D) the willingness to pay is the same across all customers.
A) it can separate willingness to pay across customers.
B) it has a substantial opportunity for reselling across market segments.
C) consumers are unable to be segmented into identifiable markets.
D) the willingness to pay is the same across all customers.
question
Monopoly
answer
the single supplier of a product that has no close substitute
question
Natural monopoly
answer
a firm that can produce at a lower cost than a number of smaller firms can
question
Average cost pricing
answer
setting price equal to average total cost
question
Price discrimination
answer
the practice of charging different consumers different prices for the same good or service
question
Reservation Price
answer
the maximum amount a customer would be willing to pay for a unit of output
question
Peak load pricing
answer
when producers charge different prices during different periods because the demand and the cost of producing a product vary over time
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