Q&A Hero

Q: A right-to-work law makes it illegalA) to prevent union members from working in any firm.B) to fire a worker who has joined a union or who tries to organize a union at any firm. C) to inquire whether a prospective employee is a member of a union or not.D) for union membership to be a requirement for continued employment in any firm.

Q: Which of the following statements is true about the market demand curve for labor?A) The market demand curve is the sum of the individual firmʹs demand curve.B) The market demand curve will be perfectly inelastic since firms need labor.C) The market demand curve shows the quantities of labor demanded by all firms in the industry at various marginal products.D) The market demand curve depends upon labor productivity, the wage rate and the price of the final product.

Q: Why is antitrust legislation necessary? A) Monopolies tend to misallocate resources. B) All monopolies are unlawful in the United States. C) Monopolies tend to allocate resources in a socially optimal manner. D) Monopolies will always make a profit in the long run.

Q: In which market structures does a firm have at least some ability to set the market price?A) Perfect competition and monopolistic competition.B) Monopolistic competition and oligopoly. C) Oligopoly and monopoly.D) Monopolistic competition, oligopoly and monopoly.

Q: Oligopoly is a situation when thereA) is one firm in the industry that is fairly large.B) are a few large firms in the industry.C) are too many firms in the industry and there is excess capacity.D) is one giant firm and many smaller firms forming a competitive fringe.

Q: In both a monopolistically competitive market and a pure monopoly market, firmsA) can make long-run profits. B) set price greater than marginal cost. C) are protected by entry barriers. D) advertise extensively.

Q: A monopolist is producing at an output level at which MR = $9 and MC = $8. It could increase profitsA) by increasing both output and price.B) by reducing output and by increasing price. C) by reducing both output and price.D) by increasing output and by reducing price.

Q: In a long-run equilibrium, a perfectly competitive firmʹs average total cost isA) minimized. B) maximized.C) zero. D) equal to average fixed cost.

Q: If marginal revenue is greater than marginal cost, the firm shouldA) raise price. B) raise marginal revenue.C) increase its rate of output. D) decrease its rate of output.

Q: Use the above figure. At an output equal to ʺQʺ the average fixed cost for the firm will be the line segmentA) DE. B) AB. C) BE. D) CD.

Q: The difference between the short run and the long run isA) economic profits are negative in the short run and positive in the long run.B) economic and accounting profits are not equal in the short run but are equal in the long run.C) that in the short run at least one factor of production cannot be varied while in the long run all factors of production can be varied.D) the short run is a period less than a year while the long run is a period greater than a year.

Q: When economic profits are zero, accounting profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.

Q: The budget lineA) shifts to the left as income increases. B) has a positive slope.C) is a vertical line.D) shows the combination of goods that can be purchased at fixed prices and with a given income.

Q: Using the above table, what is the total utility of the first piece of pizza?A) 0 utils B) 50 utils C) 75 utils D) 100 utils

Q: If the value of the cross elasticity of demand is negative, the two goods areA) complementary goods. B) substitute goods. C) normal goods. D) inferior goods.

Q: The result of the calculation of the price elasticity of demand isA) always positive.B) always negative.C) sometimes positive, sometimes negative.D) always greater than one.

Q: Government intervention will not be necessary when voluntary contracting internalizes an externality. Which of the following is NOT a necessary condition for this to occur? A) Well-defined private property rights B) Low transaction costs C) Large numbers of individuals involved in the transactions D) Low contract enforcement costs

Q: An example of third-party financing of health care isA) patients paying for their visit to the doctor.B) patients not going to the doctor in order to save money.C) a patient going to another doctor for a second or a third opinion.D) Medicare.

Q: According to the text, todayʹs Lorenz curve isA) a straight line.B) a vertical line.C) more bowed than in 1929. D) less bowed than in 1929.

Q: The weldersʹ union at Ajax is on strike. The maintenance union has decided to walk out in support of the weldersʹ union. This is known asA) a closed shop. B) a union shop.C) a sympathy strike. D) a secondary boycott.

Q: Which of the following will cause a shift in the demand curve of labor?A) An increase or decrease in the productivity of labor.B) An increase or decrease in the demand for the product labor produces. C) A decline in the price of a complementary input .D) all of the above

Q: If antitrust legislation is successful, then the monopolistic firm willA) decrease output and charge a lower price than before.B) increase output and charge a higher price than before. C) increase output and charge a lower price than before. D) decrease output and charge a higher price than before.

Q: In which market structures is the firm able to earn long-run economic profits?A) Perfect competition and monopolistic competition.B) Monopolistic competition and oligopoly. C) Oligopoly and monopoly.D) Monopolistic competition, oligopoly and monopoly.

Q: Which of the following is a characteristic of oligopoly?A) Mutual firm independence B) Zero economic profits in the short runC) Marginal cost pricing D) Only a few firms in the industry

Q: The monopolistic competitive firm in short-run equilibrium may experience economic profits that areA) always zero. B) greater than, equal to, or less than zero. C) always positive. D) always negative.

Q: A monopolist is producing at an output level at which MR = $6 and MC = $9. It could increase profitsA) by increasing both output and price.B) by reducing output and by increasing price.C) by reducing both output and price.D) by increasing output and by reducing price.

Q: In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?A) In the long run, the firm has no incentive to alter its scale of operations.B) Because profits must be zero in the long run, the firmʹs short-run average costs (SAC) must equal P at Qe, which occurs at minimum SAC.C) In the long run, the firm operates where price, marginal revenue, marginal cost, short -run minimum average cost, and long -run minimum average cost all are equal.D) In the long run, this firm must be part of a constant -cost industry, because its marginal revenue curve is perfectly elastic.

Q: If marginal revenue is less than marginal cost, the firm shouldA) raise price. B) raise marginal revenue.C) increase its rate of output. D) decrease its rate of output.

Q: Use the above figure. At an output equal to ʺQʺ the total cost for the firm will be the areaA) OQDC. B) OQFA. C) OQBC. D) OQEB.

Q: If the firm can vary all factors of production, it is operatingA) at a profit. B) at a zero economic profit.C) in the short run. D) in the long run.

Q: When accounting profits are negative, economic profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.

Q: The quantity of good M is measured along the vertical axis, and the quantity of good N is measured along the horizontal axis. If the prices of both goods M and N declines by 50% each, then the budget lineA) shifts inward to the left by 50%. B) shifts outward to the right by 50%. C) shifts outward to the right by 100%. D) rotates clockwise by 180 degrees.

Q: Using the above table, what is the total utility of the third piece of pizza?A) 75 utils B) 0 utils C) 25 utils D) -25 utils

Q: Two items which have a negative cross price elasticity of demand are referred to asA) luxury goods. B) inferior goods. C) substitutes. D) complements.

Q: The price elasticity of demand is theA) percentage change in quantity demanded divided by the percentage change in price. B) change in quantity demanded divided by the change in price.C) percentage change in price divided by the percentage change in quantity demanded. D) change in price divided by the change in quantity demanded.

Q: Buffalo in the United States almost became extinct while cattle have never been close to extinction. The difference is due toA) the greater marginal value of a buffalo relative to a head of cattle, leading to greater ʺharvestingʺ of buffalo.B) the use of private property rights on cattle and common property rights on buffalo.C) the greater marginal value of a head of cattle relative to buffalo, leading to over -hunting of buffalo.D) the differences in size between the two animals, and the effect of size differences on the costs of hunting them.

Q: Rising health care spending is a problem confronting the federal government becauseA) it is the governmentʹs job to make sure everyone receives the health care they need.B) federal spending on health care has increased rapidly over the last thirty years.C) the federal-funded VA hospitals have been expanding faster than government revenues can provide for.D) the medical expenses of federal employees has been rising at a rate much faster than for non-federal workers.

Q: The graph which represents the distribution of income in an economy is called theA) Laffer curve. B) Lorenz curve.C) distribution curve. D) aggregate demand curve.

Q: The employees of Ajax cookies are on strike. Jane has decided not to shop at any store that is still selling Ajax cookies. This is known asA) a closed shop. B) a union shop.C) a sympathy strike. D) a secondary boycott.

Q: Which of the following statements is true?A) A firm cannot increase quantity demand for labor when the wage rate falls without causing the product price to decline.B) A movement along the market demand curve for labor does not require a change in the product price.C) A firm can increase quantity demanded for labor when the wage rate falls without affecting the product price but the industry cannot hire more workers without causing the product price to fall.D) Both a firm and the industry can move down their demand curves for labor without causing product price to change.

Q: If antitrust legislation is successful, then A) firms will produce the quantity at which marginal cost equals marginal revenue. B) most firms will be earning a positive economic profit. C) the price of each item will equal its marginal social opportunity costs. D) natural monopoly will be eliminated.

Q: The market structure of perfect competition exists whenA) there are a small number of interdependent firms that constitute the entire market. B) there is a single producer of a product.C) there are many producers of differentiated products. D) there are many producers of a homogeneous product.

Q: Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?A) No, because domestic firms in oligopoly markets are always so dominant that overseas producers have little or no impact on those markets.B) No, because the United States government has effectively blocked all imports that might compete with domestic firms in oligopoly industries.C) Yes, competition from overseas firms can substantially limit domestic firmsʹ market power. D) There is no way to know.

Q: The demand curve faced by a monopolistically competitive firms isA) horizontal. B) vertical.C) downward sloping. D) unitary elastic.

Q: A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the 6th unit isA) also $14. B) $17. C) greater than $20. D) $19.

Q: Refer to the above figure. A perfectly competitive firm that is in long -run equilibrium will be operatingA) with positive economic profits. B) at a quantity greater than point E. C) at a quantity less than point E. D) at point E.

Q: The rate of production at which marginal revenue equals marginal cost isA) a point of negative profits for the firm.B) what determines the equilibrium price in the market. C) the firmʹs shutdown point.D) the point where profits are maximized.

Q: Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average fixed costs of $20. The firmʹs total variable cost at this output level isA) $120. B) $80. C) $8,000. D) $12,000.

Q: Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in theA) production time. B) corporation time.C) long run. D) short run.

Q: When economic profits are negative, accounting profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.

Q: The quantities of Good M are plotted on the vertical axis while the quantities of Good N are plotted on the horizontal axis. The prices of both M and N fall. The intercepts of the budget line would A) decline along both axes. B) rise on the vertical axis and also rise on the horizontal axis. C) rise on the horizontal axis but stay unchanged on the vertical axis. D) rise on the vertical axis but stay unchanged along the horizontal axis.

Q: Using the above table, what is the maximum number of slices of pizza a rational consumer would buy?A) 4 B) 3 C) 2 D) 1

Q: Two items which have a positive cross price elasticity of demand are referred to asA) luxury goods. B) inferior goods. C) substitutes. D) complements.

Q: Price elasticity of demand is the responsiveness of A) the quantity demanded to a change in price. B) demand to a change in supply.C) demand to a change in income.D) demand for a good to a change in the demand for another good.

Q: Common property isA) property that has mineral or oil deposits.B) a resource that everyone is free to use as much as they want. C) property owned by a group such as a club.D) property that has little economic value.

Q: The impact of technological change in the health -care area has been to A) increase both the quality of health care and the monetary costs of health care. B) increase the monetary costs of health care and decrease the quality of health care. C) decrease the monetary costs of health care while decreasing the quality of health care. D) increase longevity but decrease quality of life.

Q: The Lorenz curve showsA) the demand for jobs. B) the supply of jobs.C) the elasticity of jobs. D) the distribution of income.

Q: A jurisdictional dispute is aA) strike by a union in sympathy with another unionʹs strike or cause.B) dispute involving two or more unions over which should have control of a particular jurisdiction.C) business enterprise in which employees must belong to the union before they can be hired and must remain in the union after they are hired.D) legal environment in which businesses may hire nonunion members conditional on their joining the union by some specified date after employment begins.

Q: What has been the impact of the widespread adoption of automated teller machines (ATMs) on the demand for bank tellers?A) The demand for tellers has increased.B) The demand for bank tellers has become more inelastic.C) The demand for bank tellers has become more elastic.D) There has been no change because the ATMs and the employees provide completely different services.

Q: The idea behind antitrust legislation is toA) promote competition in the market. B) justify deregulation of industries. C) implement contestable markets. D) create larger firms.

Q: The market structure of monopolistic competition exists when A) there are a small number of interdependent firms that constitute the entire market. B) there is a single producer of a product. C) there are many producers of differentiated products. D) there are many producers of a homogeneous product.

Q: There are 30 firms in an industry. What happens to that industryʹs four -firm concentration when the third- and fourth-largest firms merge?A) Nothing, because their shares are already included in the concentration calculation. B) The industryʹs concentration ratio will fall.C) The industryʹs concentration ratio will increase.D) It is impossible to know without more information.

Q: For the monopolistically competitive firm, in both the short run and the long run A) the demand curve is inelastic. B) price will exceed marginal cost. C) there will be no economic profit. D) production will be at minimum average cost.

Q: A monopoly sells 10 units of output at $10. If the MR of the 11th unit is $4.50, then the price of the 11th unit isA) also $10. B) $9.50. C) greater than $10. D) $7.25.

Q: In a perfectly competitive market, a firm in long-run equilibrium will be operatingA) to the right of the minimum of the long-run average cost curve. B) to the left of the minimum of the long -run average cost curve.C) at the minimum of the long-run average cost curve. D) at the minimum of the marginal cost curve.

Q: The perfectly competitive firm maximizes profits whenA) it produces and sells the quantity at which the difference between marginal revenue and marginal cost is the greatest.B) it produces and sells the quantity at which marginal revenue and marginal cost are equal. C) it produces and sells the quantity at which the difference between average revenue and average cost is the greatest.D) it produces and sells the quantity at which the difference between price and average cost is the greatest.

Q: Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average variable costs of $50. The firmʹs total fixed costs areA) $50. B) $5,000. C) $150. D) $15,000.

Q: The time period during which all factors of production can be varied is theA) production time. B) calendar year.C) long run. D) short run.

Q: When accounting profits are positive, economic profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.

Q: The quantity of good Y is measured along the vertical axis, and the quantity of good X is measured along the horizontal axis. If the prices of both good Y and good X rise, the budget lineA) shifts outward to the right and the vertical and horizontal intercepts will both rise. B) shifts inward to the left and both intercepts will decline.C) rotates, rising along the vertical axis but falling along the horizontal axis. D) none of the above

Q: After consuming what quantity of pizza does the consumer in the table below experience diminishing marginal utility?A) 1 B) 2 C) 3 D) 4

Q: If the price of one good increases, and as a result the demand for another related good falls, the goods areA) substitutes. B) normal goods. C) complements. D) inferior goods.

Q: PricePer Unit Quantity DemandedPer Week$10.00259.50309.00358.50408.00457.50507.00556.50606.00655.50705.0075Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?A) 1.60 B) 1.00 C) 0.65 D) 0.60

Q: Private property rights involveA) exclusive rights to use, transfer, and exchange the property.B) exclusive rights to use property, but not to exchange the property.C) rights to enjoy the property in any way desired but not to transfer or exchange the property.D) rights granted by the government for renewable terms of 100 years or more.

Q: Which of the following is not a reason for rising health care expenditures in the United States over the last 40 years? A) Aging of the population B) Technological change C) Third-party financing of health care expenditures D) Discovery of new diseases

Q: Using a graph, compare the labor-market equilibrium under perfect competition and monopsony. Explain.

Q: A disagreement involving two or more unions over which should have control over a particular firm or industry isA) a closed shop. B) a union shop.C) a jurisdictional dispute. D) an industrial union.

Q: We would expect that a fall in labor supply will have a proportionately smaller effect on the market wage rate whenA) workers can easily be replaced by capital goods.B) the product produced in the industry has very few substitutes. C) the product is produced in a perfectly competitive industry.D) labor represents a relatively small portion of total costs.

Q: The first antitrust law in the United States was theA) Clayton Act. B) Contestable Markets Act.C) the Federal Trade Commission Act. D) Sherman Antitrust Act.

Q: The market structure of monopoly exists when A) there are a small number of interdependent firms that constitute the entire market. B) there is a single producer of a product. C) there are many producers of differentiated products. D) there are many producers of a homogeneous product.