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Economic
Q:
The value of total output decreases when labor leaves one industry and goes to another and capital leaves the second industry and goes to the first. This indicates thatA) the first situation was not efficient. B) the second situation is efficient.C) price is greater than marginal cost.D) it would be efficient to return to the first situation.
Q:
A firm in a competitive industry faces the following short-run cost and revenue conditions: ATC = $8; AVC = $4; and MR = MC = $6. This firm shouldA) expand production and keep price constant. B) decrease production and raise its price.C) shut down.D) continue to operate at the same price and output level in the short run.
Q:
The shape of the short-run average total cost curve is a result ofA) economies of scale.B) diseconomies of scale.C) the law of diminishing marginal product.D) falling profits.
Q:
Which of the following is a long-run adjustment?A) A restaurant hires a new chef.B) A company builds a new manufacturing plant. C) A bank hires a new CEO.D) A company hires ten new management trainees.
Q:
In economics we assume that the goal of a firm is toA) minimize costs. B) maximize revenue.C) maximize economic profits. D) maximize total sales.
Q:
A consumer will achieve the highest level of utility possible when she consumesA) at the point at which the highest indifference curve is tangent to the budget constraint.B) at the point at which the indifference curve crosses the budget constraint. C) at a point to the left of the budget constraint.D) just below the point where the indifference curve crosses the budget constraint.
Q:
Quantity of PizzaMarginal UtilityQuantity of BeerMarginal Utility1451402402403303354154105-550In the above table, Bob experiences diminishing marginal utility after consuming how many pieces of pizza?A) 1 B) 2 C) 3 D) 4
Q:
Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true?A) Peanut butter is a normal good, because income elasticity is positive. B) Peanut butter is an inferior good, because income elasticity is positive. C) Peanut butter is a normal good, because income elasticity is less than 1.D) Peanut butter is an inferior good, because income elasticity is less than 1.
Q:
If the absolute price elasticity of demand for a product is less than 1, thenA) consumers are relatively insensitive to price changes.B) consumers are relatively sensitive to price changes.C) there is a positive relationship between price changes and total revenue.D) producers are relatively insensitive to price changes.
Q:
Common property often results inA) a negative externality. B) a social benefit.C) a private cost. D) exclusive rights of ownership.
Q:
All of the following are reasons that health care costs have risen so much in the past few decades EXCEPTA) the aging population. B) higher imports.C) new technologies. D) third party payments.
Q:
Which of the following would be considered income in kind?A) tax refunds B) food stampsC) yard sales D) reduction in the tax rates
Q:
The U.S. labor movement startedA) with local craft unions composed of workers who engaged in a particular trade or skill, such as baking, carpentry or plumbing.B) during the Civil War. C) after World War I.D) with the Knights of Labor, an organized group of both skilled and unskilled workers.
Q:
The price elasticity of demand for labor will be smaller, theA) smaller is the price elasticity of demand for the final product.B) easier it is to employ substitute inputs in production.C) larger is the proportion of wage costs in the total cost of production.D) longer is the time period under examination.
Q:
All of the following are exempt from antitrust enforcement EXCEPT A) professional baseball. B) labor unions.C) hospitals. D) television and radio stations.
Q:
Long-run economic profits are possible underA) perfect competition and oligopoly.B) monopolistic competition and monopoly. C) oligopoly and monopoly.D) monopolistic competition and oligopoly.
Q:
Which of the following is an example of a vertical merger?A) Northeastern Illinois University merging with McDonaldʹs.B) Northeastern Illinois University merging with a training academy for new professors. C) Northeastern Illinois University merging with Roosevelt University.D) Northeastern Illinois University going from a public to a private university.
Q:
In the long run, if some monopolistically competitive firms are earning economic losses thenA) firms will leave the industry.B) raise prices until they earn economic profits.C) they will increase production until marginal costs fall. D) new firms will enter the industry.
Q:
In the above figure, what is the profit-maximizing price and output?A) $9, 14 B) $13, 14 C) $11, 16 D) $10, 17
Q:
When price equals marginal costA) firms make zero profits.B) firms make positive profits.C) the industry is in long-run equilibrium.D) the marginal benefits of consuming an extra unit of the good exactly equals the marginal cost to society of producing the good.
Q:
If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue,A) price will be at the profit maximizing level. B) sales will be at the profit maximizing level. C) the firm should expand production.D) the firm should reduce production.
Q:
When marginal product is rising,A) total product is falling.B) marginal cost is falling.C) marginal cost is rising. D) average fixed cost is rising.
Q:
If a firm can vary all of its factors of production, it is operating inA) the long run. B) the immediate run. C) equilibrium. D) the short run.
Q:
Which of the following is the formula used for computing economic profits?A) economic profits = total revenue - implicit costsB) economic profits = total revenue - (implicit costs + explicit costs) C) economic profits = total costs - total revenueD) economic profits = total revenue - explicit costs
Q:
A consumer is maximizing utility whenA) the slope of the budget constraint has reached -1. B) diminishing marginal utility has set in.C) the slope of the budget constraint equals the marginal rate of substitution.D) the consumer has spent all of his income.
Q:
For good A and good B, the consumer maximizes personal satisfaction when A) MUA/PA = PB/MUB. B) PA/MUA = PB/MUB. C) MUA/PA = MUB/PB. D) MUA/MUB = PA/PB.
Q:
Income elasticity relates toA) a movement down a demand curve. B) a movement up a demand curve.C) a horizontal shift in a demand curve.D) the percentage change in quantity demanded divided by the percentage change in the price.
Q:
If the absolute price elasticity of demand for a product is greater than 1, thenA) consumers are relatively insensitive to price changes.B) consumers are relatively sensitive to price changes.C) there is a positive relationship between price changes and total revenue.D) producers are relatively insensitive to price changes.
Q:
Common property is A) an externality.B) a social cost.C) property that is owned by everyone and therefore by no one. D) exclusive rights of ownership.
Q:
The impact of technology on health care has
A) provided for a higher quality of life.
B) increased health care costs.
C) contributed to increased life expectancy.
D) All of the above are correct.
Q:
The country reflecting perfect income equality in the above figure isA) country 4. B) country 1. C) country 5. D) country 3.
Q:
Which of the following is one of the reasons for declining union membership in the United States?A) Much of the unskilled, nonunionized work in the United States is done by immigrant workers who are undocumented.B) The AFL-CIO merger and creation of the Change to Win Federation reduced competition among unions.C) The repeal of the Taft-Hartley Act.D) Labor force participation by women has decreased.
Q:
The price elasticity of demand for labor will be greater, theA) smaller is the price elasticity of demand for the final product.B) easier it is to employ substitute inputs in production.C) smaller is the proportion of wage costs in the total cost of production.D) shorter is the time period under examination.
Q:
Which of the following are exempt from the antitrust laws?A) Colleges and universities B) All professional athletesC) Labor unions D) Deregulated industries
Q:
Which of the following is NOT a characteristic of pure monopoly?A) many sellers B) considerable price setting abilityC) restricted ability to enter market D) long-run economic profits are possible
Q:
Straight Cut beauty salon merges with Clean-Cut beauty salon. This is an example ofA) conglomerate merger. B) concentration ratio.C) vertical merger. D) horizontal merger.
Q:
In the long run, monopolistically competitive firms will not earn economic profits becauseA) average total cost will shift up to meet the demand curve. B) input prices will be bid up.C) production will not be at minimum average cost. D) new firms will enter the industry.
Q:
Use the above figure. The profit-maximizing or loss minimizing output and price will beA) Q1 and P2. B) Q2 and P3. C) Q3 and P3. D) Q4 and P1.
Q:
The opportunity cost to society of producing one more unit of the good isA) average cost. B) marginal cost.C) efficiency costing. D) the optimal cost.
Q:
For a perfectly competitive firm, when MC is less than MR, A) the producer has an incentive to expand output.B) the producer has an incentive to decrease output.C) the producer has no incentive to change production. D) economic profits must be positive.
Q:
If the marginal product of an input is falling, thenA) average fixed cost is constant. B) marginal cost is falling.C) average total cost is constant. D) marginal cost is rising.
Q:
The time frame in which all factors of production can vary isA) the short run. B) the intermediate run.C) the long run. D) indeterminate.
Q:
Another term for the opportunity cost of capital isA) the normal interest rate. B) the normal rate of return. C) a normal profit. D) a normal wage rate.
Q:
If an individual consumes only two goods and consumption of one good increases, then in order to keep the consumer on the same indifference curve, consumption of the other good mustA) increase. B) decrease.C) increase proportionately. D) become negative.
Q:
If a consumer concludes that the marginal utility of the last dollar spent on vegetables exceeds the marginal utility of the last dollar spent on junk food, he will respond byA) consuming relatively more junk food and fewer vegetables. B) consuming relatively more vegetables and less junk food.C) consuming equal amounts of vegetables and junk food.D) halting consumption of junk food altogether.
Q:
Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the itemʹs own price?
Q:
Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts isA) 0.69. B) 1.45. C) 1.00. D) infinity.
Q:
Private property rights are
A) an externality.
B) a social cost.
C) property that is owned by everyone and therefore by no one.
D) exclusive rights of ownership.
Q:
The use of hospitals today is dominated byA) the elderly. B) immigrants.C) obstetrical care. D) the wealthy.
Q:
The most unequal distribution of income in the above figure exists inA) country 4. B) country 1. C) country 5. D) country 3.
Q:
Which of the following is NOT one of the reasons for declining union membership in the United States?A) The economy has shifted away from manufacturing.B) The AFL-CIO merger and creation of the Change to Win Federation reduced competition among unions.C) Some industries have been deregulated.D) Labor force participation by women has increased.
Q:
The price elasticity of demand for labor will be greater, theA) greater is the price elasticity of demand for the final product.B) more difficult it is to employ substitute inputs in production.C) smaller is the proportion of wage costs in the total cost of production.D) shorter is the time period under examination.
Q:
Ajax Corporation has just started advertising that there are 16 ounces in every package. In reality the packages contain only 14 ounces. This misleading advertisingA) is in violation of the Robinson-Patman Act. B) is exempt from the antitrust laws.C) could be subject to an investigation by the Federal Trade Commission. D) could be subject to an investigation by the Sherman Commission.
Q:
All of the following are true regarding oligopoly EXCEPTA) there are few sellers. B) there is some ability to set price.C) there is no competition. D) entry and exit is partially restricted.
Q:
Joeʹs hotdog stand merges with a company that supplies the condiments to Joeʹs. This is an example ofA) conglomerate merger. B) concentration ratio. C) vertical merger. D) horizontal merger.
Q:
The long-run equilibrium of monopolistic competition is characterized byA) P = MC = ATC. B) P = MC > ATC. C) P = MR = MC. D) P = ATC > MC.
Q:
Use the above figure. The profit-maximizing price will beA) P1. B) P2. C) P3. D) P4.
Q:
A market failure is a situation in which
A) resources are being efficiently allocated, but some companies are forced to shut down.
B) the market equilibrium leads to either too many or too few resources going towards producing the good or service.
C) the government must take actions to correct the failures of the market in a particular industry.
D) there is no free entry or exit into an industry.
Q:
Economic profits are maximized at the point at whichA) marginal revenues equal marginal costs.B) accounting profit exceeds economic profit.C) total revenues are greater than total costs. D) accounting profits are equal to zero.
Q:
Which of the following statements is correct?A) Average variable costs always exceed average total costs.B) Average fixed costs are constant.C) Average variable cost reaches its minimum when average product equals its maximum.D) Average fixed costs are always less than average variable costs.
Q:
If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n) decision.A) immediate-run B) long-runC) short-run D) variable-input
Q:
Which of the following statements regarding accounting and economic profits is FALSE?A) Economic profits can be zero even if accounting profits are positive.B) Economic profits = total revenue - (explicit + implicit costs)C) Accounting profits can be negative if economic profits are positive.D) Accounting profits = total revenue - explicit costs
Q:
Using indifference curve analysis, an optimum is characterized byA) the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price.B) the marginal rate of substitution being equal to one. C) the marginal rate of substitution being equal to zero.D) the marginal rate of substitution being equal to the ratio of the prices of the two goods.
Q:
Suppose Isaacʹs marginal utility from attending his 5th White Sox game was 40 and the marginal utility from attending his 1st U2 concert was 200. Assume that the price of a Sox ticket is $20 and the price of a U2 ticket is $120. Which of the following would be true?A) Isaac would attend more U2 concerts and less Sox games. B) Isaac would attend more Sox games and less U2 concerts. C) Isaac would not alter his behavior.D) Isaac would attend less of both Sox games and U2 concerts.
Q:
How does the cross elasticity of demand differ from the price elasticity of demand? How are they related?
Q:
The price elasticity of demand isA) always negative. B) sometimes positive.C) always positive. D) constant along the demand curve.
Q:
When no one owns a particular resource, A) property rights are clearly defined.B) individuals have legal recourse for any damages caused to their resource.C) no one has any incentive to consider externality spillovers associated with that resource.D) positive externalities will arise.
Q:
Approximately how much of aggregate national income in the United States is spent on health care every year since 2000?A) 5 percent B) 10 percent C) 15 percent D) 30 percent
Q:
Suppose 10 percent of the families receive 10 percent of the income, 20 percent of the families receive 20 percent of the income, and so forth. The Lorenz curve would beA) a straight line at a 45-degree angle from the origin. B) a straight line at a 30-degree angle from the origin. C) the most bowed curve possible.D) the horizontal axis.
Q:
Recently, two construction industry unions also left the AFL -CIO and joined with ironworkers and bricklayers unions to formA) the National Brotherhood of Teamsters.B) the National Construction Alliance. C) the American Federation of Workers. D) Change to Win.
Q:
A 20 percent increase in the wage rate induces firms in an industry to reduce quantity demanded for labor by 5 percent in the first year. Five years later we would expect, other things constant,A) the reduction in the quantity demanded of labor to be much greater than 5 percent.B) the reduction in the quantity demanded of labor to be less than 5 percent. C) the reduction in the quantity demanded of labor to be about 5 percent.D) the quantity demanded of labor to be back to its original level.
Q:
The FTC isA) the act that prevents producers from driving out smaller competitors by means of selected discriminatory price cuts.B) the commission that investigates unfair competitive practices such as misleading advertising.C) an agency which has been set up to regulate the federal government. D) the agency set up to regulate hospitals.
Q:
Which is FALSE about perfect competition?A) There are numerous sellers.B) Market entry and exit is unrestricted. C) There is no ability to set price.D) There is considerable product differentiation.
Q:
Vertical merger occurs whenA) two firms merge where one had sold its output to the other as an input.B) the merger moves the combined firm onto the horizontal portion of its long -run average cost curve.C) two firms merge where each is about the same size.D) two firms producing a similar product merge.
Q:
The monopolistically competitive firmʹs economic profits tend toward zero in the long run. Why is this so?A) Monopolistically competitive firmʹs are rarely able to maintain the corporate discipline necessary to sustain profits in the long run.B) If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return.C) In the long run, other firms will successfully offer substitutes for the profitable firmʹs product, and competition will eliminate economic profits.D) Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.
Q:
Use the above figure. The profit-maximizing output will beA) Q1. B) Q2.C) Q3. D) None of the above are correct.
Q:
Competitive pricing is efficient becauseA) the price that consumers pay reflects the opportunity cost to society of producing the good.B) firms make positive economic profits in long-run equilibrium. C) average revenue equals average cost.D) firms produce above the minimum efficient scale.
Q:
A perfectly competitive firm is selling 300 units of output at $4 each. At this output level, total fixed cost is $100 and total variable cost is $500. The firmA) is maximizing its profit.B) is earning a profit, but not necessarily the maximum profit. C) is experiencing an economic loss.D) should shut down.
Q:
At the output rate at which diminishing marginal product begins, a firm will experienceA) constant average total costs. B) increasing average fixed costs.C) increasing marginal costs. D) decreasing average variable costs.
Q:
The amount of calendar time associated with the long runA) is less than five years. B) is greater than one year. C) is between one and five years. D) varies by industry.