Q&A Hero

Q: Which of the following best describes the Tweedle Dee -Tweedle Dum outcome? A) Two firms choose incompatible product formats. B) Two firms choose one compatible product format. C) Two firms wish to coordinate on one compatible product format but cannot agree on which one. D) Two firms choose to engage in a noncooperative game.

Q: A merger between firms that are in the same industry is called aA) conglomerate merger. B) horizontal merger.C) vertical merger. D) none of the above.

Q: Monopolistically competitive firms advertise to attempt toA) lower their average variable costs. B) build brand loyalty.C) lower barriers to entry. D) increase barriers to entry.

Q: In equilibrium, which of the following conditions is common to both unregulated monopoly and pure competition?A) P = MR B) AR = ATC C) MR = MC D) MC = P

Q: Consider an industry that is in long -run equilibrium. An increase in demand leads to an increase 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 equal to zeroA) 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: As long as output increases,A) average total costs decrease. B) average variable costs decrease. C) average fixed costs decrease. D) marginal costs decrease.

Q: A stock that has a price of $20 per share, earnings per share of $2.00, and a dividend of $1.50 will haveA) a PE ratio of 20/1.50. B) a yield of 7.5 percent. C) a yield of 12 percent. D) a PE ratio of 1.333.

Q: Which of the following is not an implicit cost? A) Wages B) Opportunity cost of using an ownerʹs savings C) Owner-provided capital D) Owner-provided labor

Q: The marginal rate of substitution isA) equal to unit changes in the quantities of both goods so that utility rises.B) the slope of the budget line at all points.C) the change in the quantity of one good that just offsets a unit change in another good, keeping utility constant.D) found by adding additional units.

Q: When marginal utility is positive, but decreasing, then total utility isA) increasing at a decreasing rate. B) negative.C) decreasing. D) increasing at an increasing rate.

Q: Suppose that the cross price elasticity of demand between goods A and B equals 0.5. Which of the following is TRUE?A) A and B are complements because the cross price elasticity is less than one. B) A and B are complements because the cross price elasticity is positive.C) A and B are substitutes because the cross price elasticity is less than one. D) A and B are substitutes because the cross price elasticity is positive.

Q: Even though price elasticity of demand is always , by convention its absolute value is always discussed as a .A) negative; prime number B) positive; negative numberC) a fraction; whole number D) negative; positive number

Q: Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Technological change that made it easier to produce in a ʺcleanerʺ fashion would causeA) curve (4) to shift out, increasing the optimal amount of pollution abatement.B) curve (3) to shift up, raising the marginal benefits and costs and reducing the amount of pollution abatement.C) curve (2) to shift out, increasing the optimal amount of pollution abatement. D) curve (1) to shift out, increasing the optimal amount of pollution abatement.

Q: Which of the following statements is TRUE?A) A growing economy should see a decline in relative poverty but not in absolute poverty.B) A growing economy should see a decline in absolute poverty but not in relative poverty. C) A growing economy should see a decline in both absolute and relative poverty.D) A growing economy is usually unrelated to changes in either absolute or relative poverty.

Q: The figure supports all of the following statements regarding the marginal factor cost curve for a monopsonist EXCEPTA) the monopsonist firm looks at a marginal cost curve, MFC, which slopes upward and is above its labor supply curve.B) the marginal benefit of hiring additional workers is given by the firmʹs MRP curve.C) the intersection of MFC with MRP, at point E, determines the number of workers hired.D) a monopsonist cannot find the profit-maximizing quantity of labor demanded at E.

Q: Which piece of legislation allowed states to pass right-to-work laws?A) Wagner Act B) Landrum-Griffin ActC) Taft-Hartley Act D) National Industrial Recovery Act

Q: The above table depicts the output of a firm that manufactures computers. The computers sell for $1,000 each. What is the marginal physical product (MPP) of the eleventh worker per week?A) 90 units B) 80 units C) $7,000 D) $6,000

Q: Which of the following is FALSE with respect to regulation? A) Regulated firms commonly try to avoid the effects of regulation whenever they can. B) Firms engage in creative responses which conform to the letter of the law but undermine its spirit. C) Regulation has resulted in state laws that have made creative response illegal in many states. D) Recent regulations have generated feedback effects that undermined the key aim of the rules.

Q: Which of the following best describes the Battle of the Sexes?A) Two firms choose incompatible product formats. B) Two firms choose one compatible product format.C) Two firms wish to coordinate on one compatible product format but cannot agree on which one.D) Two firms choose to engage in a noncooperative game.

Q: Which of the following is a characteristic of oligopoly?A) Easy entry and exit B) Many firmsC) Strategic dependence D) None of the above

Q: Which of the following is most likely to be a monopolistically competitive firm?A) a soybean farmer B) a lettuce farmerC) a municipal water district D) a fast food restaurant

Q: A monopolist finds the price-output combination that maximizes its profits by A) equating total revenue and total cost. B) equating marginal revenue and marginal cost. C) finding the combination for which the difference between marginal revenue and marginal cost is the greatest. D) equating price and marginal cost.

Q: If the long-run supply curve slopes upward, we know that this isA) a decreasing-cost industry. B) a constant-cost industry.C) an increasing-cost industry.D) a situation in which no input prices change as firms enter and exit the industry.

Q: Refer to the above figure. Profits for this firm will be maximized atA) point B. B) point C.C) a quantity greater than point C. D) a quantity between points B and C.

Q: Summing all of the costs that do not change as output varies yieldsA) variable costs. B) fixed costs. C) implicit costs. D) explicit costs.

Q: The PE ratio for a stock is A) the predicted earnings per share of the stock divided by its current yield. B) the current yield of the stock. C) the price of the stock divided by its earnings per share. D) the predicted volatility of the stock.

Q: Expenses that a firm does not have to pay out of pocket areA) wages of employees. B) taxes.C) implicit costs. D) explicit costs.

Q: The marginal rate of substitution is measured alongA) the demand curve. B) the total utility curve.C) a given indifference curve. D) a given budget line.

Q: Given the above figure, marginal utility becomes negative when Joey consumes the ________piece of pizza.A) 1st B) 3rdC) 4th D) 5th

Q: Suppose that the number of units of good X consumed falls 6 percent when the price of good Y falls 4 percent. The cross price elasticity of demand between goods X and Y isA) 0.66. B) 1.75. C) 2.0. D) 1.5.

Q: An absolute price elasticity of demand equal to 0.4 indicates that aA) 4 percent increase in price leads to a 10 percent decrease in quantity demanded.B) 1 percent increase in price leads to a 4 percent decrease in quantity demanded. C) 0.4 percent decrease in price leads to a 1 percent increase in quantity demanded. D) 10 percent decrease in price leads to a 4 percent increase in quantity demanded.

Q: Refer to the above figure. If the marginal cost curve for pollution abatement shifts to the right, everything considered, theA) degree of air quality or cleanliness will also decrease.B) the degree of air quality or cleanliness will stay unchanged. C) the degree of air quality will improve.D) the marginal cost of pollution abatement has nothing to do with air quality.

Q: Originally, the threshold income level used to determine official poverty statistics was based on A) a per capita income of $3000 in 1955 prices. B) the lowest income of the second quartile of families in the country. C) an income three times greater than necessary to purchase a nutritionally adequate diet. D) figures developed by a committee in the American Economic Association.

Q: In a monopsonistic market,A) employment is lower but wages are higher than in a comparable competitive market.B) employment is higher but wages are lower than in a comparable competitive market. C) both employment and wages are higher than in a comparable competitive market.D) both employment and wages are lower than in a comparable competitive market.

Q: The percentage of U.S. workers in the private sector who belong to unions is currentlyA) greater than 50 percent. B) approximately 20 percent.C) approximately 12 percent. D) approximately 8 percent.

Q: Quantity of WorkersTotal ProductMarginal Marginal Physical Product Revenue Product00- -17 218 330 440 548 In the above table, if this is a perfectly competitive firm and the market price of the product is $5 and the marginal factor cost of labor is $60, how many units of labor will the firm hire?A) 2 B) 3 C) 4 D) 6

Q: Behavior on the part of the firm that allows it to comply with the letter of the law but violate the spirit reducing the lawʹs effect isA) asymmetric information. B) creative response.C) the lemons problem. D) only a problem in a monopoly.

Q: Which of the following games yields an outcome in which two firms would simultaneously be willing to adopt a compatible product format?A) the prisonersʹ dilemma B) Tweedle Dee-Tweedle DumC) Battle of the Sexes D) none of the above

Q: Which of the following does NOT help explain why oligopolies exist?A) Economies of scale B) MergersC) Product homogeneity D) Barriers to entry

Q: All of the following are characteristics of a monopolistically competitive industry EXCEPT A) homogeneous products. B) many firms.C) low barriers to entry and exit. D) sales promotion and advertising.

Q: The price-output combination that maximizes profits for a monopolist occurs at the point whereA) total revenues and total costs are equal.B) the difference between total revenues and total costs is the greatest. C) total revenues are the greatest.D) the elasticity of demand equals one.

Q: If the long-run supply curve slopes downward, we know that this isA) a decreasing-cost industry. B) a constant-cost industry.C) an increasing-cost industry.D) a situation in which no input prices change as firms enter and exit the industry.

Q: Refer to the above figure. Profits for this firm are positiveA) 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: In the short run, total costs equalA) the sum of total fixed costs and total variable costs.B) the sum of total fixed costs and total explicit costs.C) the sum of total variable costs and total implicit costs.D) the sum of total fixed costs and total implicit costs.

Q: The yield percentage of a stock is calculated asA) the corporationʹs net worth divided by the number of shareholders. B) the book value of the stock divided by the number of shareholders. C) the stock dividend divided by the price of the stock.D) the expected appreciation of the stock.

Q: Out-of-pocket expenses such as wages and raw materials areA) direct costs. B) an owner-provided capital cost. C) implicit costs. D) explicit costs.

Q: The marginal rate of substitution is theA) rate at which the consumer can exchange one good for the other.B) change in the quantity of one good that just offsets a one -unit change in the consumption of another good such that the total satisfaction remains constant.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: Given the above figure, if Joey was a rational consumer he would NOT eat more than ________ piece(s) of pizza.A) 1 B) 5 C) 4 D) 6

Q: ʺThe price elasticity of demand for a particular good is smaller in the long run because consumers adapt to higher prices over time.ʺ Do you agree or disagree? Explain.

Q: A 5 percent rise in the price of a good leads to a 5 percent decrease in quantity demanded. The absolute price elasticity of demand isA) 5. B) 10. C) 0.1. D) 1.0.

Q: Refer to the above figure. The marginal benefit of pollution abatement is curveA) (1). B) (2). C) (3). D) (4).

Q: The official number of poor in the United StatesA) is higher today than at any other time in our history.B) has risen steadily since 1981. C) was lowest in the late 1960s. D) is lowest today.

Q: At the profit-maximizing level of employment, the monopsonistA) pays a wage equal to MRP. B) pays a wage greater than MRP.C) pays a wage less than MRP. D) pays a wage equal to MFC.

Q: A company can hire non-union workers, but a condition of their employment is that they must join the union within their first 90 days on the job. This is an example of aA) right-to-work law. B) closed-shop.C) union shop. D) voluntary craft union.

Q: Quantity of WorkersTotal ProductMarginal Marginal Physical Product Revenue Product00- -17 218 330 440 548 In the above table, if this is a perfectly competitive firm and the market price of the product is $8, what is the marginal revenue product of worker 3?A) $96 B) $88 C) $80 D) $240

Q: The Interstate Commerce Commission (ICC) regulates railroads, barges and trucks. Suppose technical change lowers the costs of railroads. As a result, the ICC permits railroads to lower prices some but also alters the rates of barges and trucks so they get additional business. The ICC would be acting consistently withA) the capture theory of regulation.B) the public interest theory of regulation.C) the share-the-gains, share-the-pains theory of regulation.D) None of the theories presented in the text since economic regulation is specific to a single industry and not to agencies that cover more than one industry. That is the province of social regulation.

Q: The situation in which firms wish to coordinate but cannot agree on how to do so is calledA) the prisonersʹ dilemma. B) a Tweedle Dee-Tweedle Dum game. C) Battle of the Sexes. D) a cartel.

Q: For an information product, why a profit-maximizing firm unable to practice marginal cost pricing? How is its price determined in the long run?

Q: Which of the following products would most likely be produced in a monopolistically competitive market?A) corn B) oil C) electricity D) pizza

Q: Suppose a monopolist sells 10,000 units of output at $22 per unit. The firmʹs total revenue isA) $2,200. B) $22,000. C) $220,000. D) $2,200,000.

Q: If the long-run supply curve is horizontal, we know that this isA) a decreasing-cost industry. B) a constant-cost industry.C) an increasing-cost industry.D) a situations in which some input prices change as firms enter and exit the industry.

Q: Under perfect competition, the firm must decideA) the best price to charge for its product.B) the best rate of output it should produce.C) the optimal level of advertising to engage in.D) the optimal level of quality and the packaging that will maximize profits.

Q: Marginal costs are defined asA) the change in total costs due to a one -unit change in production.B) costs that are viewed as marginal; of little or small importance.C) costs that represent a change, but one that cannot be measured correctly.D) the change in the decisions that are made by households and firms.

Q: The idea that any public information you will be able to find will prove of little value to you when buying and selling stocks, because that information is so quickly incorporated into the trading prices of stocks, is known as theA) theory of efficient markets. B) theory of fundamental analysis.C) principle of context. D) over-the-counter hypothesis.

Q: If the entrepreneur is also the manager of the firm, we would expectA) the manager to work hard because he or she is also the residual claimant.B) the manager to not work hard since there is no possibility of further advancement. C) the firm to operate poorly because the specialization of labor is not adequate.D) the firm to operate poorly because the entrepreneur is not as good at managing workers as a professional manager would be.

Q: Why canʹt an indifference curve be a straight line?

Q: Given the above figure, when Joey eats a third piece of pizza his marginal utility is ________ and his total utility is ________.A) falling; falling B) falling; rising C) rising; falling D) rising; rising

Q: Which has a more elastic demand: hamburger or beef?

Q: If the absolute price elasticity of demand is 4.0, a 5 percent decrease in price will increase quantity demanded byA) 10 percent. B) 20 percent. C) 25 percent. D) 8 percent.

Q: Refer to the above figure. The marginal cost of pollution abatement is curveA) (1). B) (2). C) (3). D) (4).

Q: The purpose of the Earned Income Tax Credit Program (EITC) is toA) provide rebates of Social Security taxes to low-income workers.B) encourage low- and moderate-income workers to take second jobs to increase their income.C) provide in-kind services such as food stamps and public housing to those individuals who have poor credit.D) give tax credits to low-income individuals who do volunteer work in their communities.

Q: A profit-maximizing monopsonist will hire workers up to the point at whichA) W = MRP. B) MRP = MFC.C) W = MFC. D) W = MRP = MFC.

Q: The type of labor agreement that requires workers to be union members prior to being considered for employment is aA) right-to-work agreement. B) closed-shop agreement. C) union shop agreement. D) open-shop agreement.

Q: Quantity of WorkersTotal ProductMarginal Marginal Physical Product Revenue Product00- -17 218 330 440 548 In the above table, if this is a perfectly competitive firm and the market price of the product is $10, what is the marginal revenue product of worker 4?A) $210 B) $100 C) $411 D) $120

Q: One undesirable effect of social regulation is that itA) affects smaller firms disproportionately, creating anticompetitive effects.B) destroys incentives for firms to engage in marginal cost pricing.C) raises prices of goods to consumers, while lowering prices to business and special interest groups.D) reduces the effectiveness of economic regulation.

Q: A Battle of the Sexes outcome occurs whenA) firms earn highest profits by adopting different product formats.B) firms earn highest profits by trying to coordinate but cannot agree on how to do so. C) firms earn highest profits by adopting either male or female product formats.D) firms cooperate as long as other firms cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation.

Q: How does an information product differ from a product such as a desk?

Q: Which of the following is NOT a characteristic of firms in a monopolistically competitive market? A) advertising B) differentiated products C) ease of entry and exit D) existence of significant economies of scale

Q: In the above figure, the monopolistʹs profit-maximizing price isA) A. B) B. C) C. D) D.