Q&A Hero

Q: Use the above figure. Last week Joe consumed combination ʺAʺ of goods ʺXʺ and ʺY.ʺ This week he purchased combination ʺB.ʺ The reason for this change is that theA) price of good X has increased. B) price of good X has decreased. C) price of good Y has decreased. D) price of good Y has increased.

Q: In a restaurant we can observe people consuming coffee, tea, and soft drinks. All are priced the same. If Sally consumes coffee and Ali consumes soft drinks, we can conclude thatA) Bill will be drinking tea.B) Sally likes coffee more than Ali does, and Ali likes soft drinks more than Sally does.C) Sally derives more utility from coffee than from tea or soft drinks, and Ali derives more utility from soft drinks than from tea or coffee.D) the utility Sally receives from coffee consumption equals the utility that Ali receives from consuming soft drinks.

Q: The income elasticity of demand for all goods taken together must beA) zero. B) -1.C) +1. D) between 0 and 1.

Q: When the calculated price elasticity of demand is -0.45, demand isA) perfectly inelastic. B) elastic.C) unit-elastic. D) inelastic.

Q: Property that is owned by everyone and therefore by no one in particular is referred to asA) common property. B) social property.C) private property. D) commercial property.

Q: How will the new federal governmentʹs new national health care program be funded?A) The federal government will charge all participants of health insurance exchanges 3.8%.B) Firms with at least 50 employees must pay an annual fine of up to $750 per employee regardless of coverage.C) A tax rate of 3.8 percent will be assessed on nearly all earnings above $200,000 per year for individuals and above $250,000 per year for married couples.D) Nearly all U.S. residents will pay a fine of up to $750 per year for an individual (up to $2,250 per year for a family) regardless of coverage.

Q: Refer to the above figure. Which curve shows the most unequal distribution of income?A) A B) B C) C D) D

Q: A labor union composed of workers in the same occupation is calledA) a craft union. B) an industrial union.C) a company union. D) a closed shop.

Q: The supply of labor to the individual firm in a perfectly competitive market isA) perfectly inelastic at the current equilibrium employment level.B) perfectly elastic at the current market clearing wage rate. C) downward sloping.D) equal to the marginal revenue of output.

Q: Suppose that smart phone producers meet secretly and agree to issue the smart phones of their most successful models sequentially and at the same price that maximizes their profits. After hearing about the secret meeting the U.S. Justice Department is most likely to file charges under theA) Sherman Act. B) Wheeler-Lea Act. C) Robinson-Patman Act. D) FTC Act.

Q: According to OSHA standards, the air in the building that John works in is unsafe. The type of regulation that OSHA engages in is known asA) the Federal Register. B) social regulation.C) the market share test. D) economic regulation.

Q: Which of the following would best exemplify an oligopolistic industry?A) Local cable provider B) Movie studiosC) Hamburger restaurants D) Retail clothing stores

Q: Refer to the above figure. The profit maximizing price for a monopolistic competitor isA) P1. B) P2. C) P3. D) P4.

Q: A profit-maximizing monopolist earns an economic loss wheneverA) it pays taxes to the government on each unit of output it produces.B) the price it charges for its product exceeds average total cost. C) the demand curve lies completely below the ATC curve.D) it produces along the elastic portion of a demand curve.

Q: Monopoly producers face A) many competitors producing the same product. B) only a few competitors producing the same product. C) at least one competitive producer of the same product. D) no competitive producers of the same product.

Q: OutputTotal Costs100$400101402102405103409104414105420106427107435Refer to the above table. If the price is $3 the maximum profit this firm could earn isA) $99. B) $306. C) -$100. D) -$99.

Q: The typical cost curves are U-shaped due to theA) law of diminishing marginal utility. B) law of supply.C) law of demand. D) law of diminishing marginal product.

Q: A negative value for the marginal physical product would indicate thatA) the company has not yet reached the point of saturation. B) total output increased by a significant amount.C) total output decreased when the extra unit of the variable input was added. D) total output increased, but the increase was very small.

Q: Economic profit isA) total revenue (explicit costs - implicit costs). B) total revenue - (explicit costs - implicit costs). C) total revenue + (explicit costs + implicit costs). D) total revenue - (explicit costs + implicit costs).

Q: Use the above figure. Last week Joe consumed combination ʺBʺ of goods ʺXʺ and ʺY.ʺ This week he purchased combination ʺA.ʺ The reason for this change is that theA) price of good X has increased. B) price of good X has decreased. C) price of good Y has decreased. D) price of good Y has increased.

Q: Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good x, a normal good?A) An increase in the marginal utility of xB) A decrease in the total utility of yC) An increase in the marginal utility of good yD) A decrease in income

Q: The income elasticity of demandA) is positive only. B) is negative only.C) must lie between -1 and +1. D) can be positive, negative, or zero.

Q: If the calculated price elasticity of demand between two points is -4, demand isA) inelastic. B) elastic.C) unresponsive to price. D) unit-elastic.

Q: A resource that is a common property isA) oil on land owned by a drilling and refining company. B) natural gas on land owned by an energy producer.C) timber on land owned by a lumber company. D) water in a publicly owned river.

Q: Which of the following is an employer mandate in the new the federal governmentʹs new national health care program?A) Under the new program, the federal government will coordinate the establishment of health insurance exchanges.B) A tax rate of 3.8 percent will be assessed on nearly all earnings above $200,000 per year for individuals and above $250,000 per year for married couples.C) Firms with at least 50 employees must either provide health insurance or pay fines when uninsured employees receive tax subsidies to purchase insurance.D) Nearly all U.S. residents must either purchase health insurance coverage or pay a fine of up to $750 per year for an individual (up to $2,250 per year for a family).

Q: The above figure displaysA) income-inequality curves. B) Gini Coefficients. C) Lorenz curves. D) Laffer curves.

Q: A secondary boycott isA) illegal according to the Taft-Hartley Act. B) a legal way to support striking workers. C) illegal according to the Wagner Act.D) legal according to the Sherman Act.

Q: In a perfectly competitive industry, an individual firm facesA) a perfectly inelastic labor supply curve. B) a perfectly vertical labor supply curve.C) a perfectly elastic labor supply curve. D) none of the above.

Q: The Supreme Courtʹs decision in the Standard Oil of New Jersey case wasA) to force the company to send refund checks to customers.B) to force the company to pay $10 billion in fines. C) to increase the fine imposed by a lower court. D) to break up the company.

Q: Which of the following protects people from incompetent or unscrupulous producers?A) The Federal Register B) Social regulationC) The market share test D) Economic regulation

Q: Which of the following would best exemplify an oligopolistic industry?A) agriculture B) large aircraft manufacturingC) confections D) retail convenience stores

Q: Refer to the above figure. The profit maximizing quantity for a monopolistic competitor isA) Q1. B) Q2. C) Q3. D) Q4.

Q: When the marginal cost curve of the monopolist shifts upward, there will beA) an increase in both price and quantity.B) an increase in price but a decrease in quantity. C) a decrease in price and in marginal revenue.D) a decrease in quantity and a decrease in marginal revenue.

Q: Why is the pricing outcome of a perfectly competitive firm efficient in economic sense?

Q: OutputTotal Costs100$400101402102405103409104414105420106427107435Refer to the above table. If the price is $3, the perfectly competitive firm should produceA) 102 units. B) 105 units. C) 103 units. D) 104 units.

Q: What happens to the marginal cost curve when the marginal physical product of labor is rising?A) It becomes upward sloping. B) It becomes vertical.C) It becomes downward sloping. D) It becomes horizontal.

Q: Which of the following changes a firmʹs production function? A) Hiring additional workers B) Acquiring additional physical capital C) Adding a second production facility exactly like its first production site D) Adopting new technology

Q: Economic profits are A) total revenue minus explicit costs. B) total revenue minus implicit costs. C) total revenue minus explicit and implicit costs. D) total revenue minus accounting costs.

Q: If price of a product fallsA) the marginal utility of the product also falls.B) the budget line rotates to the right. C) the budget line rotates to the left.D) the indifference curve will shift to the left.

Q: Assume that the marginal utility from good x is 10 units and that the price of good x is $5 per unit. The marginal utility from good y is 15 units and its unit price is $7. In this situation, a utility-maximizing consumer shouldA) consume more of good x. B) consume only good y.C) consume more of good y. D) consume neither x nor y.

Q: Janice earns an income of $2,000 a week and goes out to lunch 3 times a week. If her income increased to $2,100 she would go out to lunch 4 times a week. Compute Janiceʹs income elasticity of demand.A) 0.17 B) 5.86 C) 7 D) 100

Q: Elastic demand impliesA) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded.B) that a one percent increase in price results in a larger than one percent decrease in quantity demanded.C) that a one percent cut in price results in a larger than one percent increase in quantity demanded.D) that a one percent decrease or increase in price induces no change in total revenue.

Q: The exclusive rights of ownership of property are generally referred to asA) level property rights. B) private property rights.C) public property rights. D) common property rights.

Q: Which of the following is an individual mandate in the new the federal governmentʹs new national health care program?A) Under the new program, the federal government will coordinate the establishment of health insurance exchanges.B) Firms with at least 50 employees must either provide health insurance or pay fines when uninsured employees receive tax subsidies to purchase insurance.C) A tax rate of 3.8 percent will be assessed on nearly all earnings above $200,000 per year for individuals and above $250,000 per year for married couples.D) Nearly all U.S. residents must either purchase health insurance coverage or pay a fine of up to $750 per year for an individual (up to $2,250 per year for a family).

Q: If everyone earned the same income, the Lorenz curve would beA) a rectangular hyperbola.B) a straight line from the origin at a 45 -degree angle. C) the horizontal axis.D) very bowed from the diagonal.

Q: A jurisdictional dispute means that A) members of a union disagree on the outcome of union elections. B) a higher court reversed the decision of a lower court in a case brought by a union. C) a union leadership and membership cannot agree on an issue. D) two unions disagree on which should represent workers in a particular industry.

Q: When there is an increase in the wages the banking industry offers accountants, what happens to the supply of accountants available to other industries?A) The supply to other industries increases. B) The supply to other industries falls.C) The supply curve for other industries shifts to the right.D) no change

Q: Which of the following is illegal according to the antitrust laws? A) the use of coupons B) price discrimination based on cost differences C) vertical mergers D) price fixing

Q: The Federal Trade Commission (FTC) is a regulatory agency that is responsible for preventing firms from engaging in misleading advertising. This type of regulation is known asA) the Federal Register. B) social regulation.C) the market share test. D) economic regulation.

Q: Which of the following is NOT a cause for an oligopoly to exist?A) economies of scale B) structural dependenceC) barriers to entry D) horizontal mergers

Q: Which of the following statements is true about the economic profits earned by a monopolistic competitor firm in the long run?A) Economic profits can be positive since firms have some degree of monopoly power.B) Economic profits will be positive since the firm has a downward sloping demand curve. C) Economic profits will tend towards zero since positive profits will attract new firms into the industry.D) Economic profits can be negative since there is so much competition in the market.

Q: Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC =$45.00; MC = $35.00; MR = $35.00; P = $50.00. What is the monopolyʹs profit?A) -$1000 B) $4500 C) $5000 D) $500

Q: Why would it be economically inefficient for a firm to charge the price of a good greater than its marginal cost?

Q: OutputTotal Costs100$400101402102405103409104414105420106427107435Refer to the above table. If the price is $6 the maximum profit this firm could earn isA) $210. B) $414. C) $420. D) $630.

Q: When average variable costs are rising,A) marginal physical product is also rising. B) marginal costs is falling.C) average physical product is rising. D) average physical product is falling.

Q: Fredʹs Franks originally sold hotdogs and soft drinks from a cart located in front of City Hall.Then Fred purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school. Both locations have been successful. When Fredʹs Franks expanded to two locations, which of the following did NOT occur?A) Fredʹs production function changed. B) Production increased.C) The company increased the inputs it employs. D) The firm employed additional capital.

Q: Owner-provided capital and owner-provided labor are examples ofA) explicit costs. B) implicit costs.C) normal rate of return. D) accounting costs.

Q: Use the above figure. When the budget line rotates from ʺcʺ to ʺbʺA) fewer units of J and fewer units of K will be purchased.B) more units of J and more units of K will be purchased. C) fewer units of J and more units of K will be purchased. D) more units of J and fewer units of K will be purchased.

Q: When the marginal utility per dollar of good x exceeds the marginal utility per dollar of good y, A) the consumer should consume more of good x.B) the consumer is consuming too much of good x. C) good y must have a negative marginal utility.D) the consumer is in an optimal situation if the price of good x exceeds the price of good y.

Q: When John earned $65,000 he purchased 10 DVDs a year. His income has just increased to $68,000 and he plans to purchase 15 DVDs this year. Johnʹs income elasticity of demand equalsA) 0 B) 0.11 C) 1.67 D) 8.87

Q: Inelastic demand impliesA) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded.B) that a one percent increase in price results in a larger than one percent decrease in quantity demanded.C) that a one percent cut in price results in a larger than one percent increase in quantity demanded.D) that a one percent decrease or increase in price induces no change in total revenue.

Q: Common propertyA) is owned by everyone. B) is owned by no one.C) Neither A nor B are correct. D) Both A and B are correct.

Q: All of the following are key features of the new the federal governmentʹs national health care program EXCEPTA) people must either purchase health insurance or pay a fine to the federal government.B) a young person in good health can opt not to purchase health insurance without penalty.C) firms with at least 50 employees must either provide health insurance or pay fines when uninsured employees receive tax subsidies to purchase insurance.D) Government-directed exchanges will assist in matching individuals and small businesses with health insurance policies that satisfy government requirements.

Q: A Lorenz curve that is perfectly straight indicatesA) that society is very rich.B) that a small portion of the population accounts for most of the income. C) that a large portion of the population accounts for most of the income. D) complete income equality.

Q: Which type of collective bargaining agreement requires workers to be union members prior to being considered for employment?A) right-to-work B) union shop C) open shop D) closed shop

Q: An industryʹs equilibrium wage rate is establishedA) by the industry supply curve for labor alone.B) by the slope of the industry demand curve for labor alone.C) by the Labor Department and based on the cost of living in the area.D) by the intersection of the industry supply and demand curves for labor.

Q: The Sherman ActA) prohibited banks from crossing states lines.B) prohibited railroads from transporting explosives. C) provided for the regulation of natural monopolies.D) declared that monopolization and restraint of trade were illegal.

Q: The regulation of the prices charged by insurance companies is known asA) the Federal Register. B) social regulation.C) the market share test. D) economic regulation.

Q: The recent merger of Southwest Bell (SBC) and AT&T companies is an example of aA) horizontal merger. B) vertical merger.C) consolidation merger. D) cooperative merger.

Q: A monopolistic competitor is in long-run equilibrium whenA) economic profits are equal to zero and the average total cost curve is tangent to the demand curve.B) economic profits are equal to zero and the marginal cost curve is tangent to the demand curve.C) economic profits are greater than zero and the average total cost curve is tangent to the demand curve.D) economic profits are greater than zero and the marginal cost curve is tangent to the demand curve.

Q: Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $45.00. What is the monopolyʹs profit?A) -$1000 B) $4500 C) $0 D) $3500

Q: What is marginal cost pricing? Why is marginal cost pricing important?

Q: OutputTotal Costs100$400101402102405103409104414105420106427107435Refer to the above table. If the price is $6, the perfectly competitive firm should produceA) 104 units. B) 105 units. C) 106 units. D) 107 units.

Q: When marginal costs are rising,A) marginal physical product is also rising. B) marginal physical product is falling.C) average physical product is rising. D) average physical product is falling.

Q: Which of the following statements is FALSE?A) Included in the firmʹs short-run production function are both fixed and variable inputs. B) An efficient firm can obtain more output than the production function shows.C) The production function shows the technical relationship between a firmʹs inputs and outputs.D) The production function presents the technically efficient methods of combining inputs to produce output.

Q: Accounting profits areA) total revenue minus explicit costs. B) total revenue minus implicit costs.C) total revenue minus explicit and implicit costs. D) total revenue minus normal costs.

Q: Use the above figure. When the budget line rotates from ʺcʺ to ʺbʺA) the price of product J increases. B) the price of product J decreases. C) the price of product K increases. D) the price of product K decreases.

Q: The marginal utility of good A is 6 and the marginal utility of good B is 15. The price of good A is $2. The price of good B must be if the consumer is optimizing her utility.A) $2 B) $5 C) $45 D) $15

Q: The difference between price elasticity of demand and income elasticity of demand is thatA) income elasticity of demand examines how an individualʹs income changes when prices change and the price elasticity of demand examines how quantity demand changes when price changes.B) income elasticity refers to the movement along the demand curve while price elasticity refers to a horizontal shift of the demand curve.C) income elasticity measures the responsiveness of income to changes in supply while price elasticity of demand measures the responsiveness of demand to a change in price.D) income elasticity refers to a horizontal shift of the demand curve while price elasticity of demand refers to a movement along the demand curve.

Q: If the absolute price elasticity of demand for automobiles is equal to 0.75, we sayA) that demand is inelastic.B) that demand is elastic.C) that there is a strong responsiveness of quantity demanded to automobiles price cuts.D) none of the above is correct.