Q&A Hero

Q: What would make the demand for labor more elastic?

Q: The Sherman Antitrust Act was enforced in 1906 by a ruling of the Supreme Court regarding the monopolization of the oil industry byA) Getty Oil of Oklahoma. B) Texaco Oil of Texas.C) Gulf Oil of Pennsylvania. D) Standard Oil of New Jersey.

Q: The Securities and Exchange Commission and the Federal Aviation Administration are examples of agencies engaged inA) the regulation of natural monopolies.B) the regulation of nonmonopolistic industries. C) social regulation.D) health and safety regulation.

Q: FirmAnnual SalesFirmAnnual SalesA$1000G$800B800H1500C220I1050D75J90E50K75F40L300Refer to the above table. The eight-firm concentration ratio isA) 100 percent. B) 96 percent. C) 94.5 percent. D) 87.2 percent.

Q: In the short run, the monopolistic competitor is just like the perfect competitor in that A) equilibrium is determined by setting price equal to marginal cost. B) either type of firm can earn economic profits, experience economic losses, or break even in the short run. C) each equates marginal revenue and marginal cost in order to maximize profits, with the result that price exceeds marginal revenue. D) new firms enter in the short run when firms are making profits.

Q: According to the above figure, the maximum profit the monopolist can receive isA) 0. B) $1,500 per day. C) $9,000 per day. D) $7,500 per day.

Q: A situation in which the price charged is less than societyʹs opportunity cost would lead toA) too little being produced. B) too much being produced. C) an efficient amount being produced. D) marginal cost pricing.

Q: Why should a perfect competitor produce at which price equals marginal cost?

Q: Quantity of LaborTotal ProductAverage ProductMarginal Product122222225226303812729410025195115231561262111Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?A) After 1 unit B) After 2 units C) After 3 units D) After 6 units

Q: Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first two workers?A) 15 cookies B) 20 cookies C) 17.5 cookies D) 35 cookies

Q: Which of the following is the formula used for computing an accounting profit? A) accounting profits = total revenue - implicit costs B) accounting profits = total revenue - (implicit + explicit costs) C) accounting profits = total costs - total revenue D) accounting profits = total revenue - explicit costs

Q: If a consumer chooses a combination of goods that are inside of her budget line, than A) the consumer is maximizing her satisfaction. B) the consumer is spending more than her current income. C) the consumer has a constant marginal rate of substitution for the two goods. D) the consumer is not maximizing her satisfaction.

Q: Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez shouldA) consume twice as much beer as wine. B) consume twice as much wine as beer.C) increase his consumption of beer relative to wine. D) increase his consumption of wine relative to beer.

Q: Income elasticity of demand reflectsA) the change in total quantity demanded divided by the total change in income.B) the responsiveness of the quantity demanded to changes in income, adjusting its relative price so real income does not change.C) the responsiveness of income of producers to a change in quantity sold of the good.D) the responsiveness of demand to changes in income.

Q: ʺPrice elasticity measures how many more units of a good that consumers will buy given a decrease in price.ʺ Do you agree or disagree? Explain.

Q: Which of the following is a true statement?A) Any property right system will yield a situation in which all externalities are internalized. B) Voluntary agreements can always yield a situation in which all externalities are internalized.C) Opportunity costs always exist with whoever has property rights.D) Opportunity costs turn external costs into social costs.

Q: Which country has the highest per capita health care expenditures in the world?A) Canada B) France C) United States D) Japan

Q: When examining the financial status of households, wealth isA) synonymous with income.B) a flow variable whereas income is a stock variable.C) a stock variable and includes both tangible assets and human capital.D) not as important as income because wealth does not change over time.

Q: Laws that outlaw union shops and which may be passed (or not) by individual states are calledA) Smoot-Hawley laws. B) pro-scab laws.C) free-rider laws. D) right-to-work laws.

Q: ʺThe market demand curve for labor is the horizontal summation of the labor demand curves of all firms.ʺ Do you agree or disagree? Why?

Q: The Sherman Antitrust Act of 1890 prohibitedA) export tariffs. B) attempts to restrain trade.C) all existing monopolies. D) interstate commerce.

Q: The two basic types of government regulation areA) regulation of natural monopolies and regulation of cartels.B) economic regulation and industry regulation. C) social regulation and labor law.D) social regulation and economic regulation.

Q: FirmAnnual SalesFirmAnnual SalesA$1000G$800B800H1500C220I1050D75J90E50K75F40L300Refer to the above table. The four -firm concentration ratio isA) 85.8 percent. B) 75 percent. C) 72.5 percent. D) 59.2 percent.

Q: A monopolistic competitor finds its profit-maximizing rate of output byA) equating the marginal revenue from advertising with the marginal revenue from selling the good.B) setting average revenue equal to average total cost. C) equating marginal revenue and marginal cost.D) equating price and marginal revenue.

Q: A monopolist is maximizing profit at an output rate of 1,000 units per month. At this output rate, the price that its customers are willing and able to pay is $8 per unit, average total cost is $5 per unit, and marginal cost is $6 per unit. It may be concluded that at this monthly output rate, marginal revenue isA) $5 per unit, and the monopolist earns zero economic profits.B) $6 per unit, and the monopolist earns economic profits of $2,000 per month. C) $6 per unit, and the monopolist earns economic losses of $1,000 per month. D) $6 per unit, and the monopolist earns economic profits of $3,000 per month.

Q: A situation in which the price charged is greater than societyʹs opportunity cost would lead toA) too little being produced. B) too much being produced. C) an efficient amount being produced. D) marginal cost pricing.

Q: What does a perfectly competitive firm do to maximize profits?

Q: Marginal costs will begin to rise at the point whereA) fixed costs increase. B) variable costs increase.C) average variable costs increase. D) diminishing marginal product begins.

Q: Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the marginal product of the 3rd worker?A) 21.67 cookies B) 65 cookies C) 30 cookies D) 35 cookies

Q: Suppose that during a given time period the implicit cost for a business was $1,500 and that the explicit cost was $6,000. Also suppose that the firm sold 1,000 units of its products at $7 per item. We can conclude that the firmʹsA) accounting profit was $1,000, and its economic profit was -$500. B) accounting and economic profits were both $1000.C) accounting profit was -$500, and economic profit was $1,000. D) accounting profit was $1000, and economic profit was -$1,500.

Q: When indifference curve analysis is used, a consumer optimum occurs at the point at whichA) the indifference curves intersect.B) the indifference curve is tangent to the budget line. C) total utility is maximum.D) marginal utility/price ratio of all goods consumed is equal.

Q: For any two goods, X and Y, if MUX divided by PX equals 2.5 and MUY divided by PY equals 4.0, then with given income and prices the consumer shouldA) buy more of good X and less of good Y.B) buy more of good Y and less of good X. C) buy all of good Y and no X.D) stop because an equilibrium is achieved.

Q: When Fredʹs income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals .A) 0.45 B) 0.40 C) 2.20 D) 2.50

Q: ʺThe slope of the demand curve gives the elasticity of demand.ʺ Do you agree or disagree? Why?

Q: Your neighbor in an apartment complex plays his music very loudly late at night, which makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on your sleep, to never play his music between midnight and 7 AM. By doing so,A) you have failed to bring about an efficient solution since you should have complained to the police.B) you have indicated the cost of the externality. The externality is not internalized even if he accepts your offer.C) you have indicated the cost of the externality, which internalizes the externality. D) you have indicated a willingness to make the external cost a social cost.

Q: Since the 1930s, out-of-pocket payments for health care have A) declined from about 50 to 30 percent of total payments. B) declined from about 95 to 20 percent of total payments. C) declined from about 70 to 30 percent of total payments. D) not changed and remain at 70 percent of total payments.

Q: Compared to a sampling of other developed nations, the U.S. income distribution is more unequal than many others. What accounts for this?A) The lowest-income families in the United States earn much less than the lowest -income households in other nations.B) Marginal income tax rates are much higher in the United States than in any other nation.C) The highest-income families in the United States earn much more than the highest -income households in other nations.D) Other nations manipulate their data to look better.

Q: Which of the following type of shops is unlawful under the provisions of the Taft -Hartley Act?A) union shops B) closed shopsC) modified union shops D) open shops

Q: Which will NOT affect the elasticity of demand for labor?A) the labor intensity of the production processB) the elasticity of supply for laborC) the elasticity of demand for the goodD) the substitutability of capital for labor

Q: One organization in the United States today that is exempt from antitrust laws isA) the automobile industry. B) professional baseball.C) the oil industry. D) the steel industry.

Q: The Food and Drug Administration (FDA) is an agency that would enforceA) social regulation. B) economic regulation.C) antitrust laws. D) price discrimination.

Q: A concentration ratio is used toA) determine whether a market structure is oligopoly.B) determine the importance of labor in the production process.C) determine the degree of homogeneity in the market.D) see if a firm qualifies for federal assistance.

Q: Which of the following statements about a monopolistically competitive firm is TRUE?A) A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits.B) A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost.C) A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve.D) A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue.

Q: ʺUnlike a perfect competitor, a profit -maximizing monopolist produces at an output rate at which marginal revenue exceeds marginal cost.ʺ Do you agree or disagree? Why

Q: A situation in which the price charged is greater than societyʹs opportunity cost would lead toA) market failure. B) marginal monopoly pricing.C) marginal profits. D) marginal cost pricing.

Q: For a perfectly competitive firm, which of the following is NOT true?A) The average revenue curve, the demand and the marginal revenue curves are identical. B) The total revenue curve begins at the origin and slopes upward as output increases.C) The slope of the total revenue curve is equal to the product price. D) The total revenue curve is horizontal.

Q: When the average physical product is falling,A) average variable costs are rising. B) average fixed costs are rising.C) total costs are falling. D) average variable costs are falling.

Q: Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the marginal product of the 2nd worker?A) 15 cookies B) 20 cookies C) 30 cookies D) 35 cookies

Q: Suppose that during a given time period the implicit cost for a business was $1,000 and that the explicit cost was $5,000. Also suppose that the firm sold 1,000 units of its products at $5 per item. We can conclude that the firmʹsA) accounting profit was $5,000, and its economic profit was $0.B) accounting and economic profits were both $0.C) accounting profit was $0, and economic profit was $1,000.D) accounting profit was $0, and economic profit was -$1,000.

Q: Use the above figure. What does point N represent?A) A consumer maximizing her satisfaction.B) A consumer not maximizing her satisfaction.C) A consumer is spending more than her current income.D) A less satisfying point than compared to point J.

Q: Assume that Jackie concludes that he should eat less and play racquetball more. In this situation, it must be true that the marginal utility of the last dollar spent on food isA) more than the marginal utility of the last dollar spent on racquetball. B) less than the marginal utility of the last dollar spent on racquetball. C) equal to the marginal utility of the last dollar spent on racquetball.D) negative and less than the marginal utility of the last dollar spent on racquetball.

Q: If demand for Rolls Royce automobiles rises in an area where incomes have increased, this tells us that a Rolls Royce isA) a normal good.B) an inferior good. C) a complementary good. D) a substitute good.

Q: Price elasticity of demand is measured using percentage changes. Why?

Q: Which of the following is a true statement? A) Externalities cannot be solved by market solutions and always require government action. B) Externalities would never be a problem if people were willing to comply with government regulations. C) Voluntary agreements can solve externality situations by making the party incurring the costs bear the costs of his or her actions. D) Externalities can only be handled by government regulation and emission taxes cannot work effectively.

Q: The federal government and insurance companies are examples of third partyA) payers for health care. B) users of health care.C) providers of health care. D) observers of health care.

Q: Since World War II, the share of total income going to the bottom 20 percent of U.S. households hasA) fallen by 20 percent. B) increased by 10 percent. C) remained constant. D) more than doubled.

Q: Which of the following laws made ʺclosed shopsʺ unlawful?A) Taft-Hartley Act B) National Industrial Recovery ActC) National Labor Relations Act D) Railway Workers Act

Q: Which of the following would cause the price elasticity of demand for a variable input to be greater?A) The smaller the price elasticity of demand for the final productB) The longer the time period being consideredC) The smaller the proportion of total costs accounted for by the variable inputD) The harder it is for a variable input to be substituted for by other inputs

Q: The agency that deals with issues of ʺunfair and deceptive acts or practices in commerceʺ is theA) Federal Trade Commission. B) Federal Products Commission.C) Federal Consumer Protection Agency. D) Federal Advertising Commission.

Q: U.S. government regulation of social and economic activityA) only began after World War II. B) costs less now than it did in the 1980s.C) has increased steadily since 1970. D) is confined to antitrust law.

Q: Which of the following statements about concentration ratios is correct?A) A high concentration ratio indicates that the industry is a monopoly.B) A high concentration ratio indicates that the industry is monopolistically competitive. C) A high concentration ratio suggests that the industry is characterized by strategic independence.D) A high concentration ratio suggests that the industry is characterized by strategic dependence.

Q: A monopolistically competitive firm maximizes profits when it A) produces the quantity at which marginal cost equals the market price. B) produces the quantity at which marginal cost equals marginal revenue and uses the demand curve to determine the market price. C) produces the quantity at which marginal cost equals marginal revenue and sets the price equal to the marginal cost. D) produces the quantity at which marginal cost equals marginal revenue and sets the price equal to the marginal revenue.

Q: How does a monopoly maximize profits? What price does it charge?

Q: A situation in which the price charged is equal to societyʹs opportunity cost is known asA) market failure. B) marginal monopoly pricing.C) marginal profits. D) marginal cost pricing.

Q: A firm should continue producing untilA) the cost of producing the output equals the revenues obtainable from selling the output.B) the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit.C) average costs are at a minimum.D) the average cost when another unit is produced equals the average revenue obtainable from selling the extra unit.

Q: When the average physical product is rising,A) total cost is falling. B) average total cost is increasing.C) average variable cost is falling. D) marginal cost is always rising.

Q: Production functions indicate the relationship betweenA) factor costs and output prices. B) factor inputs and the quantity of output.C) the value of inputs and average costs. D) factor inputs and factor prices.

Q: Which of the following equations is correct?A) accounting profit = total revenue - (explicit costs + implicit costs) B) normal profit = accounting profit + economic profitC) economic profit = accounting profit - implicit costsD) economic profit = accounting profit - explicit costs

Q: Use the above figure. What would make all possible points attainable for the individual to consume?A) A decrease in the price of good y. B) An increase in the price of good y. C) An increase in the price of good x. D) A decrease in income.

Q: Quantity of PizzaMarginal UtilityQuantity of BeerMarginal Utility1451402402403303354154105-550Referring to the above table, suppose Bobʹs ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal. If the price of beer increasesA) Bob will probably consume more beer and less pizza. B) Bob will probably consume less beer and less pizza. C) Bob will probably consume less beer and more pizza.D) Bob will still consume the same amount of beer and pizza.

Q: Income elasticity of demand is defined asA) the change in income divided by the change in quantity. B) the change in price divided by the change in income.C) the percentage change in demand divided by the percentage change in income. D) the change in income multiplied by the change in quantity.

Q: What is the price elasticity of demand? How is the price elasticity of demand calculated?

Q: Transaction costs areA) the costs associated with making a transaction that is required by the government. B) not true costs since they are often not paid.C) the costs associated with exchanges in the service area.D) the costs associated with making, reaching and enforcing agreements.

Q: Which of the following is NOT a reason for the increase in health care costs?A) the aging of the population B) the implementation of new technologiesC) the increase in third party payments D) the decrease in the fertility rate

Q: Some economists criticize the Lorenz curve because itA) accounts for differences in the size of households when it should not.B) does not include the cumulative percentage of households.C) does not include unreported income earned in the underground economy.D) represents the inequality of lifetime income when it should just look at a specific time period.

Q: The Congress of Industrial Organizations (CIO) was formed in 1938 byA) John L. Lewis. B) Samuel Gompers. C) Walter Reuther. D) Ralph Nader.

Q: All of the following affect the demand elasticity for labor EXCEPT A) final product income elasticity.B) ease of substitution of labor for other inputs. C) final product price elasticity.D) labor costs as a portion of total cost.

Q: The antitrust legislation that forbids a company from selling goods on the condition that the purchaser must deal exclusively with that company is theA) Sherman Act. B) Robinson-Patman Act. C) Fair Trade Commission Act. D) Clayton Act.

Q: Unrestricted entry and exit into the market is found in A) perfect competition and monopolistic competition. B) perfect competition and oligopoly.C) monopolistic competition and oligopoly.D) perfect competition, monopolistic competition and oligopoly.

Q: The percentage of all sales contributed by the leading four or leading eight firms in an industry is known asA) a horizontal merger. B) a vertical merger.C) economies to scale. D) the concentration ratio.