Q&A Hero

Q: When workers are paid a wage that is less than their contribution to a monopsonistʹs revenues, A) this is sometimes referred to monopsonistic exploitation.B) this is sometimes referred to as an incentive. C) they seek part time employment.D) they file a grievance with their union representative.

Q: The Taft-Hartley ActA) permits states to outlaw unions.B) permits states to pass right-to-work laws.C) encourages unions to engage in sympathy strikes.D) encourages unions to engage in secondary boycotts.

Q: At a perfectly competitive firm, all of the following is true of the MRP curve EXCEPT A) the MRP curve is the derived supply of labor.B) the MRP curve shifts leftward when labor productivity falls. C) the MRP curve shifts rightward when the product price rises.D) the MRP curve shifts leftward when the demand for the final product falls.

Q: When regulators identify with the special interests of the industry they regulate, this behavior conforms with theA) share-the-gains, share-the-pains hypothesis. B) rate-of-return hypothesis.C) lemon market hypothesis.D) capture hypothesis.

Q: Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two product formats (A and B) in an industry. A possible outcome of the dominant strategy is:A) Both firm X and firm Y would be willing to choose product format A.B) Neither firm X nor firm Y would be willing to choose product format B simultaneously.C) Firm X chooses product format A while firm Y chooses product format B. D) Firm X chooses product format B while firm Y chooses product format A.

Q: In oligopoly, any action by one firm to change price, output, or quality causesA) a reaction by other firms. B) no reaction from the other firms.C) a profit gain for the other firms. D) loss of market share by the acting firm.

Q: A market situation in which a large number of firms produce similar but not identical products is calledA) pure monopoly. B) monopolistically competitive. C) oligopolistic behavior. D) perfectly competitive.

Q: According to the above figure, the profit maximizing price -output combination for the monopolist is a price ofA) 50 cents and an output of 40,000 newspapers per day. B) 30 cents and an output of 30,000 newspapers per day. C) 60 cents and an output of 30,000 newspapers per day. D) 45 cents and an output of 45,000 newspapers per day.

Q: A decreasing-cost industry will have A) a perfectly elastic long-run supply curve. B) a perfectly inelastic long-run supply curve. C) an upward sloping demand curve in the long run. D) a downward sloping supply curve in the long run.

Q: Total revenuesA) are defined as the quantity sold divided by price.B) are not the same as total receipts from the sale of output. C) equal gross revenues minus all expenses of the firm.D) equal the price per unit times the total quantity sold.

Q: Total OutputTotal Costs0$101182213234245266297338389441051In the above table, total fixed costs areA) $10.00. B) $5.00. C) $8.00. D) $18.00.

Q: According to the random walk theory,A) the probability that a stockʹs price will increase tomorrow is greater if it increased today.B) the probability that a stockʹs price will increase tomorrow is greater if it decreased today. C) the best forecast of tomorrowʹs price is todayʹs price.D) the best forecast of tomorrowʹs price is found by determining the trend for the last five trading days.

Q: The difference between explicit costs and implicit costsA) is that explicit costs are opportunity costs while implicit costs are not.B) is that implicit costs are opportunity costs while explicit costs are not.C) is that explicit costs are short-run costs and implicit costs are long-run costs.D) is that explicit costs involve resources that are purchased and implicit costs involve resources the firm already owns.

Q: CombinationGood AGood BA174B135C106D87Refer to the above table. The table gives the various combinations of Good A and Good B along Janeʹs indifference curve. The marginal rate of substitution when Jane goes from combination A to combination B isA) 4:1. B) 3:1. C) 2:1. D) 0.

Q: If a dinner guest is serious when claiming he just could not get enough of your lasagna and that the more he ate the more he wanted, you would conclude that for him the marginal utility of lasagna wasA) increasing. B) decreasing. C) zero. D) constant.

Q: When two goods are substitutes for each other, the cross price elasticity of demandA) will be negative. B) will be zero.C) may be either positive or negative. D) will be positive.

Q: Suppose the demand for frozen yogurt cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, isA) 3. B) 1. C) 0.33. D) 1.33.

Q: Suppose people value clean air more as their incomes increase, then A) the marginal cost curve of pollution abatement to shift left, increasing the degree of air quality. B) the marginal cost curve of pollution abatement to shift right, increasing the degree of air quality C) the marginal benefit curve of pollution abatement to shift right, increasing the degree of air quality D) the marginal benefit curve of pollution abatement to shift left, increasing the degree of air quality

Q: Social Security is A) an insurance program operated by the federal government. B) a retirement program that invests the personʹs contributions into interest -earning financial assets so the proceeds can fund the personʹs retirement. C) a social insurance program that guarantees that an elderly person will never fall below the poverty level. D) an intergenerational transfer program that only vaguely relates to past earnings.

Q: Monopsonistic exploitation refers toA) the payment to the resource equal to MFC.B) the payment to a resource less than MRP. C) the payment to a resource equal to MRP. D) the payment to a resource above MRP.

Q: A closed shop is one in whichA) a union is prohibited.B) some members belong to the union while others do not. C) belonging to a union is a condition of employment.D) the union is a co-manager of the day-to-day operations of the firm.

Q: An increase in labor productivity will shiftA) MRP curve to the left. B) MRP curve to the left. C) MRP curve to the right. D) MFC curve to the left.

Q: The theory of regulatory behavior that suggests that regulators must consider the demands of legislators, consumers, and members of the regulated agency is calledA) the capture theory.B) share-the-gains, share-the-pains theory. C) the natural theory.D) the creative theory.

Q: Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two product formats (A and B) in an industry. The game with the dominant strategy is also called:A) Battle of the Sexes. B) Tit-for-Tat.C) Tweedle Dee-Tweedle Dum. D) the prisonersʹ dilemma.

Q: Strategic behavior and game theory are features of which market structure?A) Perfect competition B) MonopolyC) Monopolistic competition D) Oligopoly

Q: Because the products of firms in a monopolistically competitive market are not homogeneous, theA) demand curve for the industry is the same for the firm. B) demand curve for the firmʹs product is horizontal.C) demand curve for the firmʹs product is downward sloping. D) demand curve for the firmʹs product is upward sloping.

Q: The monopolist faces a downward sloping demand curve, and maximizing profits requires the monopolist toA) accept the market price for its product.B) will produce where the demand curve is inelastic.C) search for the price consistent with producing to the point at which marginal revenue equals marginal cost.D) search for the highest possible price consistent with maximizing its revenues, irrespective of its explicit and implicit opportunity costs.

Q: An increasing-cost industry will have A) a perfectly elastic long-run supply curve. B) a perfectly inelastic long-run supply curve. C) an upward sloping supply curve in the long run. D) an upward sloping demand curve in the long run.

Q: For the perfectly competitive firm, priceA) equals average revenue and marginal revenue.B) equals average total cost.C) changes as output changes.D) depends on the fixed cost for the firm.

Q: Total OutputTotal Costs0$101182213234245266297338389441051Using the above table, we see that when output is 4 units, average variable cost equalsA) $24.00. B) $14.00. C) $3.50. D) $6.00.

Q: Exchanges of stocks take placeA) in New York City only.B) in the principle financial city of each country, such as New York City for the United States and London for England.C) in a decentralized fashion around the world.D) in centralized physical locations known as stock exchanges and online through Internet brokers.

Q: A legal organization of a firm where the business is owned by one individual who makes the business decisions, receives all the profits, and is legally responsible for the debts of the firm is a(n)A) corporation. B) entrepreneur. C) proprietorship. D) partnership.

Q: Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situationA) the marginal rate of substitution falls.B) the marginal utility of the first rises and the marginal utility of the second good falls.C) Total utility rises.D) Both A and B are correct.

Q: The principle that ʺas more of a good is consumed, its extra benefit declinesʺ is known asA) the law of demand.B) the law of diminishing marginal product. C) the law of diminishing marginal utility. D) the law of comparative advantage.

Q: If goods X and Y are complements, then the cross price elasticity of demand will beA) elastic. B) greater than zero but less than 1.C) negative. D) positive.

Q: The local baseball stadiumʹs concession stands previously sold hot dogs for 80 cents apiece. At that price, when a baseball fan went to watch a baseball game, he bought 2 hotdogs. But now that the stadium has a ʺdime-a-dog night,ʺ he has purchased 6 hot dogs. What is the approximate value of this individualʹs absolute price elasticity of demand for hot dogs?A) 0.64 B) 0.80 C) 1.00 D) 1.56

Q: Technological change that makes it easier to produce in a ʺcleanerʺ fashion would cause A) the marginal cost curve of pollution abatement to shift left, increasing the degree of air quality. B) the marginal cost curve of pollution abatement to shift right, increasing the degree of air quality C) the marginal benefit curve of pollution abatement to shift right, increasing the degree of air quality D) the marginal benefit curve of pollution abatement to shift left, increasing the degree of air quality

Q: The official poverty level is based on pretax income including cash. Which of the following statements is correct regarding this official specification of poverty?A) This is a good definition of poverty since it is made up of the income from productive resources.B) This is not a good definition of poverty because our tax structure consists of different tax brackets based on income.C) This is not a good definition of poverty because it does not include in -kind subsidies. D) This is a good definition of poverty because it is easy to measure.

Q: Paying a wage to an employee that is lower than the employeeʹs marginal revenue product is sometimes referred to asA) illegal in most states. B) monopolistic exploitation. C) monopsonistic exploitation. D) total exploitation.

Q: A boycott of products sold by companies that are dealing with a company whose workers are on strike is aA) jurisdictional dispute. B) sympathy strike.C) right-to-boycott law. D) secondary boycott. Answer: D

Q: If labor productivity increases,A) labor costs rise by equal increments. B) the demand for labor increases.C) some workers will be laid off. D) jobs will relocate.

Q: Acme Inc. found a tricky way to conform to the letter of the law with respect to new EPA regulations, even though they violated the spirit of the law. This is calledA) the capture theory.B) collusive response.C) share-the-gains, share-the-pains theory. D) creative response.

Q: Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two product formats (A and B) in an industry. A possible outcome of the dominant strategy is:A) Both firm X and firm Y choose product format A. B) Both firm X and firm Y choose product format B.C) Firm X would be willing to choose product format A while firm Y simultaneously would wish o choose product format B.D) Firm X would be willing to choose product format B as long as firm Y wishes simultaneously also to choose product format B.

Q: The measurement of industry concentration which calculates the percentage of all sales contributed by a specific number of leading firms is called theA) Herfindahl-Hirschman Index. B) concentration ratio. C) producer price index. D) P/E ratio.

Q: The greater the the number and closeness of substitutes available between monopolistically competitive firms,A) the greater the ability of a firm to raise its price above the price of close substitutes .B) the smaller the ability of a firm to raise its price above the price of close substitutes. C) the more inelastic the demand curve.D) the greater the positive economic profits for a single firm.

Q: In maximizing economic profit, the monopolist willA) choose the highest price that still permits some output sales.B) equate marginal cost to minimum average total cost. C) equate price to marginal cost.D) equate marginal revenue to marginal cost.

Q: Consider an industry that is in long -run equilibrium. An increase in demand leads to no change in the price of the good. We know that this isA) a decreasing cost industry. B) a constant cost industry.C) an increasing cost industry. D) not a competitive industry.

Q: Which of the following equals the ratio of the change in total revenues over the change in output?A) Total cost B) Average revenueC) Demand D) Marginal revenue

Q: Total OutputTotal Costs0$101182213234245266297338389441051Using the above table, we see that when output is 4 units, average total cost equalsA) $24.00. B) $14.00. C) $3.50. D) $6.00.

Q: Stock markets for securities are important because A) they are where corporations raise financial capital. B) they are where proprietorships and partnerships raise financial capital. C) they permit individuals to transfer their savings directly into investment spending. D) they make the stocks and bonds more valuable.

Q: Juanita has just started a business and is using her personal car to deliver goods. The use of her car is an example ofA) an explicit cost to the business. B) an implicit cost to the business. C) financial capital. D) interest.

Q: The marginal rate of substitution is theA) rate at which the consumer will give up one good for an additional unit of the other good, such that total satisfaction is constant.B) rate at which the consumer can trade one good for the other in the marketplace.C) change in the quantity of one good that changes the utility received by one unit. D) same thing as the marginal utility of a good.

Q: ʺAs an individual consumes more units of a good, her total utility falls because of the law of diminishing marginal utility.ʺ Do you agree or disagree? Explain.

Q: Suppose that the amount of computer printers demanded increases by 20 percent when the price of personal computers falls by 10 percent. The cross price elasticity of demand between computer printers and personal computers isA) 0.5. B) -2.0. C) -0.5. D) 2.0.

Q: Six months ago, the price of gasoline was $2.20 per gallon. Now, the price is $2.40 per gallon. In response to this price increase, the number of gallons of gasoline purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for gasoline?A) 4.35 B) 1.20 C) 0.23 D) 0.10

Q: The marginal cost curve of pollution abatement isA) downward sloping. B) upward sloping.C) horizontal. D) vertical.

Q: Many argue the poor are getting poorer, at least in a relative sense. Evidence that contradicts this is thatA) household income of the lowest twenty percent of households relative to the highest twenty percent of households has fallen over the last thirty years.B) the official poverty level of income has increased over the years.C) household spending of the lowest twenty percent of households relative to the highest twenty percent of households has held constant over the last thirty years.D) the pretax distribution of income is more equal than the after -tax distribution of income.

Q: A monopsonistic employer faces aA) perfectly elastic labor supply curve.B) perfectly inelastic labor supply curve.C) MFC curve that is greater than the wage rate at each quantity of labor.D) MFC curve that is less than the wage rate at each quantity of labor.

Q: The Taft-Hartley Act of 1947 outlawedA) strikes.B) make-work rules and forcing unwilling workers to join a union. C) right-to-work states.D) none of the above.

Q: An increase in the price of a productA) automatically increases wages.B) raises the firmʹs demand for labor.C) would probably decrease total revenues. D) increases productivity.

Q: U.S. securities firms recently agreed to pay a record amount of $1.4 billion in settlement charges brought by government regulators. Regulators claimed that firms had abused investors during the market boom of the 1990s. Abuses included analysts tailoring their research reports and ratings on the stocks they covered in order to win more business for their firm. If this settlement causes Wall Street firms to comply with the letter of the law but they violate the spirit of the law, the firms are engaging inA) elimination of conflicts of interest. B) creative response. C) the capture hypothesis. D) deregulation.

Q: In the Battle of the Sexes, profits are the highest ifA) the two firms choose incompatible product format.B) the two firms choose to adopt one particular product format. C) the two firms do not cooperate on the product format.D) none of the above

Q: A merger between firms in which one firm purchases an input from the other is called aA) conglomerate merger. B) horizontal merger. C) vertical merger. D) none of the above.

Q: The greater the product differentiation between monopolistically competitive firms, A) the lower the barriers to entry.B) the greater the price elasticity of demand. C) the higher the average variable costs.D) the lower the price elasticity of demand.

Q: Profits can be maximized by equating MR = MC = Price, A) only in perfectly competitive markets.B) only in monopoly markets.C) only in discriminating monopoly markets.D) only with government price controls.

Q: Consider an industry that is in long -run equilibrium. An increase in demand leads to a decrease in the price of the good. We know that this isA) a decreasing cost industry. B) a constant cost industry.C) an increasing cost industry. D) not a competitive industry.

Q: Refer to the above figure. Profits for this firm are negativeA) only for all points less than B.B) only at points B and C.C) for points between B and C.D) for all points less than B and greater than C.

Q: Which of the following is correct?A) AFC = TC/Q - TVC/Q B) AVC = TVC - AFC C) TC = AVC∗Q D) MC = TC - TVC

Q: The most prestigious stock market in the world is theA) New York Stock Exchange. B) Chicago Mercantile Exchange.C) London Stock Exchange. D) Tokyo Stock Exchange.

Q: Which of the following is not an explicit cost? A) Taxes B) Rent C) Wages D) Opportunity cost of using an ownerʹs savings.

Q: The marginal rate of substitution isA) the change in the quantity of one good that just offsets a one unit change in the consumption of another such that the total satisfaction remains constant.B) the additional satisfaction from consuming an additional unit of a good or service.C) positively related to the level of income.D) the set of goods and services that are available to the consumer given his income.

Q: What is the relationship between marginal utility and total utility? What happens to total utility as marginal utility declines?

Q: Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%.This would mean that pizza and root beer areA) substitutes, with a cross price elasticity of 0.5.B) complements, with a cross price elasticity of -0.5. C) substitutes, with a cross price elasticity of -2.0.D) complements, with a cross price elasticity of -2.0.

Q: When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal toA) 0.15. B) 0.60. C) 0.73. D) 1.67.

Q: Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Suppose the equilibrium is for a factory in Los Angeles. What would happen if the same factory were in the middle of Nevada?A) The marginal cost curve (1) would shift to (2) and there would be no difference in the level of abatement.B) The marginal cost curve (2) would shift to the left and there would be less abatement in Nevada.C) The marginal benefit curve (4) would shift to the left and there would be less abatement in Nevada.D) The marginal benefit curve (2) would shift to the right and there would be more abatement in Nevada.

Q: Which of the following statements is FALSE?A) The official absolute poverty level in the United States is far above the average income of many countries in the world.B) In a relative sense, the problem of poverty will always exist.C) An equal distribution of income would eliminate relative poverty. D) An equal distribution of income would eliminate absolute poverty.

Q: In order to hire additional laborers, a monopsony mustA) lower the supply of labor. B) raise the wage rate.C) advertise for the labor. D) do nothing.

Q: A state with ʺright-to-workʺ laws would most likely haveA) higher employment levels than neighboring states without such laws.B) more workersʹ benefits than neighboring states without such laws. C) more union workers than neighboring states without such laws.D) more worker safety requirements than neighboring states without such laws.

Q: The above table depicts output from a firm that manufactures computers. The computers sell for $1,000 each. What is the marginal revenue product (MRP) for the fourteenth worker per week?A) 90 units B) 80 units C) $70,000 D) $60,000

Q: The theory of regulatory behavior that predicts that the ʺregulatorsʺ eventually will become controlled by the ʺregulatedʺ is calledA) the capture hypothesis.B) the the share-the-gains, share-the-pains hypothesis. C) the asymmetric information hypothesis.D) the market failure hypothesis.