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Economic
Q:
According to the theory of regulation, regulators must take into account the preferences of legislators, consumers, and producers.A) capture B) general interestC) public interest D) share-the-gains, share-the-pains
Q:
In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly ifA) they engage in a zero -sum game. B) they use a price-leadership model.C) they use a kinked demand curve model.D) a few firms reap most of the sales gains resulting from positive market feedback.
Q:
Information products (e.g., software)
A) have relatively high fixed costs but low marginal and average variable costs.
B) have relatively low fixed costs but high marginal and average variable costs.
C) have relatively high fixed costs and relatively high marginal and average variable costs.
D) have relatively low fixed costs and relatively low marginal and average variable costs.
Q:
Monopolistic competitors advertise becauseA) they have downward sloping demand curves.B) the demand curves they face are very elastic.C) they produce goods that can be differentiated from the goods of other firms in the industry.D) they can earn long-run profits if they advertise.
Q:
The profit-maximizing price and quantity established by the unregulated monopolist in the above figure areA) Q1 units of output and a price of P5. B) Q3 units of output and a price of P3. C) Q1 units of output and a price of P1. D) Q4 units of output and a price of P4.
Q:
Refer to the above figure. Which panel represents the long-run supply curve for a constant cost industry?A) Panel A. B) Panel B. C) Panel C. D) Panel D.
Q:
The price per unit times the total quantity sold isA) average revenue. B) marginal revenue.C) total revenue. D) price revenue.
Q:
The marginal cost curve intersectsA) the average fixed cost curve at its minimum. B) the average total cost curve at its maximum.C) the minimum of the average fixed cost, average variable cost and the average total cost curves.D) the minimum of the average variable cost and average total cost curves.
Q:
Suppose you own $15,000 of personal property, $5,000 of stock in ABC Corporation, a $1,000 certificate of deposit, and $10,000 of government bonds. If ABC goes bankrupt, the most you could lose isA) $31,000. B) $26,000. C) $15,000. D) $5,000.
Q:
The goal of the firm isA) low labor turnover. B) to maximize sales.C) to minimize costs. D) profit maximization.
Q:
An indifference curve between one dozen eggs and several dozens of eggs would beA) bowed in to the origin. B) bowed out from the origin.C) a downward sloping straight line. D) a straight line from the origin.
Q:
As marginal utility declines but remains positive, thenA) total utility continues to increase but at a decreasing rate.B) total utility also declines. C) total utility is unaffected. D) none of the above.
Q:
Which of the following is NOT a determinant of the price elasticity of demand?
A) the number of producers of the good
B) the number of substitutes available to buyers
C) the time consumers have to adjust to a price change
D) expenditures on the item as a percentage of a consumerʹs total budget
Q:
The price elasticity of demand is a measure ofA) the responsiveness of the quantity demanded of a good to a changes in the price of the good.B) the quantity demanded of a good at a given price.C) the demand for a product holding prices constant.D) the horizontal shift in the demand curve when the price of a good changes.
Q:
According to economic analysis, the optimal level of pollution isA) always zero.B) at the point at which the marginal benefits of pollution control exceed the marginal cost. C) at the point at which the marginal benefits of pollution control are less than the marginal cost.D) at the point at which the marginal benefits from pollution control are equal to the marginal cost.
Q:
Which of the following statements about the Social Security (OASDI) program is FALSE?A) Benefits are paid to individuals who would be financially secure in their absence. B) Benefits are based on need.C) Benefits are an intergenerational transfer program from those who work to those who donʹt work.D) When an insured worker dies, benefits continue for widows or other dependents.
Q:
Under monopsony, marginal factor cost isA) equal to the wage rate.B) below the wage rate but increases as more workers are hired.C) greater than the wage rate. D) downward sloping.
Q:
Collective bargaining refers toA) negotiations between workers and health officials.B) negotiations between management of a company and a labor union.C) farming methods in Marxist states.D) the process of electing union leaders.
Q:
The MRP of labor will shift to the left ifA) labor productivity increases. B) labor productivity decreases.C) wages increase. D) wages decrease.
Q:
Economists who think the capture theory explains regulatory behavior will support their claims by noting that
A) regulation as carried out in this country generates larger profits for the firms and does not generate lower prices for consumers.
B) consumers actually dominate regulatory hearings through the influence of consumer advocacy groups.
C) Congress ensured that consumers have more influence on the decisions of regulators by setting up the agencies in ways that insulated the regulators from the regulated firms.
D) the firms that are regulated have greater incentive to try to influence regulators than do consumers.
Q:
Because all of his friends stopped exclusively wearing black clothes, Doug wears anything but black clothes. This is known asA) a negative sum game. B) collusion.C) positive market feedback. D) negative market feedback.
Q:
For a firm that sells an information product, the long -run equilibrium exists at a point whereA) price equals average total cost. B) price equals average variable cost.C) price equals average fixed cost. D) price equals marginal cost.
Q:
The key feature of monopolistic competition isA) interdependence of the firms. B) lack of advertisement.C) product differentiation.D) the small number of firms in the industry.
Q:
The profit maximizing behavior of a monopoly is different from that of a perfectly competitive firm in that a monopoly canA) only choose the desired output, while a competitive firm can control only price. B) only choose the desired price, while a competitive firm can control only output. C) control the position of its demand schedule, but a competitive firm cannot.D) control the desired price and output to maximize profits, but a perfectly competitive firm can only choose the desired output.
Q:
Firms in a perfectly competitive industry are earning economic losses. This isA) a signal to entrepreneurs that some of the firms in the industry should exit and the resources of these firms should move into production of other goods.B) a signal to entrepreneurs that additional resources should be brought into this industry in order to make it profitable.C) a signal that the entrepreneurs are doing a poor job and should become workers for someone else.D) a signal to government officials that a subsidy is needed for the firms in the industry.
Q:
The total amount received from the sale of output isA) average revenue. B) marginal revenue.C) total revenue. D) price revenue.
Q:
Suppose there are fixed costs and marginal costs that are constant. Then we know thatA) average total costs are also constant.B) average variable costs decrease continuously as output increases, and lie above the marginal cost curve.C) average total costs decrease continuously as output increases, and lie above the average variable cost curve, which also is decreasing continuously.D) average total costs decrease continuously as output increases, and lie above the average variable cost curve, which is constant.
Q:
If a corporation fails, the last recipients of funds that may remain areA) preferred stockholders. B) common stockholders.C) bond holders. D) government tax collectors.
Q:
On a bar graph comparing a firmʹs economic profit with its accounting profit, it will always be true thatA) explicit costs will be greater in the column representing accounting profit. B) explicit costs will be greater in the column representing economic profit. C) total revenue will be greater in the column depicting accounting profit.D) opportunity costs will be missing from the column depicting accounting profit.
Q:
An indifference curve cannot be positively sloped becauseA) the law of diminishing marginal utility would be violated. B) the substitution effect would be violated.C) a point to the right of another point will represent a lower quantity of both goods and a reduction in utility.D) a point to the right of another point will represent a higher quantity of both goods and an increase in utility.
Q:
If we are graphing total utility, then the total utility curve willA) always be increasing.B) always be decreasing.C) be increasing as long as marginal utility is positive.D) be horizontal if marginal utility is positive.
Q:
Which of the following is NOT a determinant of the price elasticity of demand?
A) the availability of potential substitutes
B) the share of the budget spent on the item
C) the time the consumer has to adjust to the price change
D) the cost to produce the product
Q:
Attaining higher and higher levels of air cleanliness causesA) additional costs to rise to increasingly high levels.B) larger and larger increases in per capita incomes. C) additional costs to fall to lower and lower levels. D) larger and larger marginal benefits to society.
Q:
If an individual receives in-kind transfers from the government in the form of food stamps, public housing, and so on, his money income isA) less than his total income.B) greater than his total income.C) the same as his total income.D) equal to his in-kind income plus his wages.
Q:
A monopsonist is currently employing 50 workers at $10 an hour. It wants to hire an additional worker, but will have to pay the worker $10.10. The marginal factor cost isA) ten cents.B) $10.00. C) $10.10. D) $15.10.
Q:
Workers in the United States were granted the legal right to engage in collective bargaining by theA) National Labor Relations Act. B) Taft-Hartley Act.C) Landrum-Griffin Act. D) Knights of Labor Act.
Q:
The MRP of labor will shift to the right ifA) labor productivity increases. B) labor productivity decreases. C) wages increase. D) wages decrease.
Q:
According to the capture hypothesis of regulation,
A) regulation favors producers over consumers because the producers were able to pay off the regulators.
B) regulation eventually favors producers over consumers because the producers have more at stake than individual consumers.
C) regulation benefits the regulators and the legislators who support the regulation by enabling them to obtain favors from both producers and consumers.
D) regulation benefits the consumers over producers because the number of consumers is greater than the number of producers, giving the consumers more political clout.
Q:
Sunil has decided not to purchase another can of Stosh because his friends laughed at him the last time he purchased some. Stosh is no longer a popular item. Sunilʹs action is known asA) price-leadership. B) negative-sum game.C) positive market feedback. D) negative market feedback.
Q:
The long-run equilibrium for a firm in an information product industry exists at a point at which
A) marginal cost equals marginal revenue.
B) the demand curve crosses the marginal cost curve.
C) the demand curve is tangent to the average total cost curve.
D) average total cost is minimized.
Q:
The demand for the product of a monopolistically competitive firm is highly elastic whenA) firms collude. B) there are fewer firms in the industry. C) there is a lot of product differentiation. D) there are a lot of close substitutes.
Q:
Suppose a monopolistʹs costs and revenues are as follows: ATC = $50.00; MC = $45.00; MR = $40.00; P = $55.00. The firm shouldA) increase output and decrease price. B) decrease output and increase price.C) not change output or price. D) shut down.
Q:
Profits and losses are true signals because theyA) convey information about true long-run profits. B) cannot be misinterpreted by entrepreneurs.C) convey information about where to place resources and reward people who act on the information.D) reward people who make profits with even more profits and punish those who make losses with even more losses.
Q:
Refer to the above figure. If an individual firm wants to maximize economic profits, it shouldA) charge $5 for its product.B) charge more than $5 for its product since increasing the price will increase revenues. C) charge less than $5 for its product since a lower price will attract more customers.D) withdraw its product from the market forcing the market price up.
Q:
Refer to the above figure. Curve (4) is theA) total fixed cost curve. B) marginal product curve.C) average fixed cost curve. D) average variable cost curve.
Q:
If a corporation fails, the first recipients of funds that may remain areA) preferred stockholders. B) common stockholders.C) bond holders. D) no one.
Q:
To find economic profit from accounting profit, it is necessary toA) subtract dividends. B) add retained earnings.C) subtract the opportunity cost of capital. D) add depreciation expense.
Q:
A curve that shows a set of consumption alternatives that give the same level of satisfaction isA) a substitution curve. B) a budget line.C) an indifference curve. D) an income curve.
Q:
If marginal utility is zero, total utility isA) falling. B) increasing.C) at its maximum. D) negative.
Q:
For an addictive drug such as heroin, if the price of heroin increases, thenA) the quantity demanded never changes.B) the quantity demanded will decrease by a relatively large amount. C) the quantity demanded will actually increase.D) the quantity demanded will decrease by a relatively small amount.
Q:
The marginal benefit of pollution abatement is represented byA) an upward sloping curve. B) a downward sloping curve. C) a horizontal curve. D) a vertical curve.
Q:
If the expected rate of return on a stock exceeds the required rate,
a. The stock is experiencing supernormal growth.
b. The stock should be sold.
c. The company is probably not trying to maximize price per share.
d. The stock is a good buy.
e. Dividends are not being declared.
Q:
If we include cash benefits and in -kind benefits available to low-income people, the share of the U.S. population in povertyA) drops dramatically. B) increases somewhat.C) increases dramatically. D) does not change.
Q:
An increase in a firm's expected growth rate would normally cause the firm's required rate of return to
a. Increase.
b. Decrease.
c. Fluctuate.
d. Remain constant.
e. Possibly increase, possibly decrease, or possibly remain unchanged.
Q:
The main difference between a monopsonist and a competitive buyer of labor is thatA) the monopsonist can hire as many workers as it wants at the going wage while the competitive firm must raise wages to hire additional workers.B) the competitive firm can hire as many workers as it wants at the going wage while the monopsonist can hire more workers at lower wages.C) the competitor can hire as many workers as it wants at the going wage while the monopsonist must raise wages to hire additional workers.D) the monopsonist can force wages down and still hire as many workers as it wants while the competitive firm must increase the wage rate to hire additional workers.
Q:
Assuming g will remain constant, the dividend yield is a good measure of the required return on a common stock under which of the following circumstances?
a. g = 0.
b. g > 0.
c. g < 0.
d. Under no circumstances.
e. Answers a and b are both correct.
Q:
Which of the following is the largest union in the United States?A) International Brotherhood of TeamstersB) International Brotherhood of Electrical WorkersC) National Education AssociationD) American Federation of State, County, and Municipal Employees
Q:
A project with a 3-year life has the following probability distributions for possible end of year cash flows in each of the next three years:
Q:
The firmʹs demand for labor curve is itsA) average product of labor curve.B) marginal product of labor curve.C) marginal revenue product of labor curve.D) average revenue product of labor curve.
Q:
Assume that, to help build your nest-egg, you made two deposits of $100, one on January 1, 2014, and one on July 1, 2014, in a savings account that paid 10 percent compounded semiannually. On January 1, 2015, the bank increased the interest rate paid on savings accounts to 12 percent, annual compounding. Then you made a third $100 deposit on April 1, 2015. How much should there be in your account on January 1, 2016?
a. $353.08
b. $349.95
c. $355.27
d. $362.10
e. $338.43
Q:
Under the U.S. system of regulation, most regulars are selected fromA) politicians and their friends.B) the industry that is to be regulated. C) consumer advocacy groups.D) university professors who understand the nature of the industry and who understand the true interests of consumers.
Q:
You will receive a $100 annual perpetuity starting at Year 0, a $300 annual perpetuity with the first payment at the end of Year 5, and a $200 semiannual perpetuity (i.e., 2 payments per year) with the first payment in the middle of Year 10. If you require an effective annual interest rate of 14.49 percent, what is the future value of all three perpetuities together? (Hint: The effective semiannual interest rate is equal to (1.1449)1/2− 1.0 = 7%.)
a. $2,091.86
b. $2,785.14
c. $4,213.51
d. Infinite; the future value of any perpetuity is infinite.
e. Cannot determine the value since some payments are received annually and some semiannually.
Q:
Stephanie listens to punk rock because her friends do. This isA) a positive sum game. B) collusion.C) positive market feedback. D) negative market feedback.
Q:
An investor is considering the purchase of 20 acres of land. An analysis indicates that if the land is used for cattle grazing, it will produce a cash flow of $1,000 per year indefinitely. If the investor requires a return of 10 percent on investments of this type, what is the most he or she should be willing to pay for the land?
a. $1,000
b. $10,000
c. $100,000
d. $150,000
e. $1,000,000
Q:
For a firm that sells an information product, the long -run equilibrium exists at a point at which economic profits areA) negative. B) zero.C) positive. D) dependent upon the particular product.
Q:
You have the opportunity to buy a perpetuity which pays $1,000 annually. Your required rate of return on this investment is 15 percent. You should be essentially indifferent to buying or not buying the investment if it were offered at a price of
a. $5,000.00
b. $6,000.00
c. $6,666.67
d. $7,500.00
e. $8,728.50
Q:
An implication of the downward slope of the demand curve for a monopolistic competitive firm is thatA) its marginal revenue curve slopes upward.B) its marginal revenue curve and its demand curve are identical (same) line.C) its marginal revenue curve slopes downward but lies above the demand curve. D) its marginal revenue curve slopes downward but lies below the demand curve.
Q:
Suppose a monopolistʹs costs and revenues are as follows: ATC = $50.00; MC = $35.00; MR = $45.00; P = $55.00. The firm shouldA) increase output and decrease price. B) decrease output and increase price.C) not change output or price. D) shut down.
Q:
Which of the following statements is most correct?
a. The first payment under a 3-year, annual payment, amortized loan for $1,000 will include a smaller percentage (or fraction) of interest if the interest rate is 5 percent than if it is 10 percent.
b. If you are lending money, then, based on effective interest rates, you should prefer to lend at a 10 percent simple, or quoted, rate but with semiannual payments, rather than at a 10.1 percent simple rate with annual payments. However, as a borrower you should prefer the annual payment loan.
c. The value of a perpetuity (say for $100 per year) will approach infinity as the interest rate used to evaluate the perpetuity approaches zero.
d. Statements a, b, and c are all true.
e. Only statements b and c are true.
Q:
A true signal mustA) convey information only.B) convey information and direct the resource owners to act appropriately.C) convey information about the long-run future. D) explain in detail why something should be done.
Q:
Which of the following statements is correct?
a. Simple rates can't be used in present value or future value calculations because they fail to account for compounding effects.
b. The periodic interest rate can be used directly in calculations as long as the number of payments per year is greater than or equal to the number of compounding periods per year.
c. In all cases where interest is added or payments are made more frequently than annually, the periodic rate is less than the annual rate.
d. Generally, the APR is greater than the EAR as a result of compounding effects.
e. If the compounding period is semiannual then the periodic rate will equal the effective annual rate divided by two.
Q:
TotalOutputTotalCostsTotalOutputTotalCosts100$500106$528101501107540102503108555103506109580104510110615105518111660Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $5/unit. What is true when the firm produces 110 units?A) Total revenue equals $3,075.B) Total costs exceed total revenue by $65.C) Marginal revenue is more than marginal cost. D) Its total profit is $65.
Q:
A $10,000 loan is to be amortized over 5 years, with annual end-of-year payments. Given the following facts, which of these statements is correct?
a. The annual payments would be larger if the interest rate were lower.
b. If the loan were amortized over 10 years rather than 5 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 5-year amortization plan.
c. The last payment would have a higher proportion of interest than the first payment.
d. The proportion of interest versus principal repayment would be the same for each of the 5 payments.
e. The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were higher.
Q:
Refer to the above figure. Average variable costs are represented by curveA) 1. B) 2. C) 3. D) 4.
Q:
Which of the following statements is correct?
a. Cash flow time lines are helpful graphical displays for situations involving simple annual interest but are not useful when time periods are more frequent than annual.
b. The future value of an annuity due is equal to the future value of an otherwise identical regular annuity with interest compounded on each payment for one additional period.
c. There is no precise method of calculating either present values or future values when fractional time periods are involved. We must instead use rough approximations.
d. The terminal value of a stream of uneven cash flows is found by simply summing up all the cash flows.
e. The annual percentage rate (APR) cannot be equivalent to the effective annual rate (EAR).
Q:
When a corporation uses profits to pay for the purchase of new capital equipment, this is know asA) reinvestment. B) a coupon payment. C) dividend. D) collusion.
Q:
Which of the following statements is correct?
a. Other things held constant, an increase in the number of discounting periods per year increases the present value of a given annual annuity.
b. Other things held constant, an increase in the number of discounting periods per year increases the present value of a lump sum to be received in the future.
c. The payment made each period under an amortized loan is constant, and it consists of some interest and some principal. The later we are is the loan's life, the smaller the interest portion of the payment.
d. There is an inverse relationship between the present value interest factor of an annuity and the future value interest factor of an annuity, (i.e., one is the reciprocal of the other).
e. Each of the above statements is true.
Q:
Which of the following statements is correct?
a. If a bank uses quarterly compounding for saving accounts, the simple rate will be greater than the effective annual rate.
b. The present value of a future sum increases as the simple interest rate increases or the number of discount periods per year decreases.
c. The present value of a future sum increases as either the simple interest rate or the number of discount periods per year increases.
d. The present value of a future sum decreases as either the simple interest rate or the number of discount periods per year increases.
e. All of the above statements are false.
Q:
The economyʹs current rate of interest is 10 percent and a firm has $10,000 of owner -invested capital. Its total revenue is $5000 and the firmʹs explicit costs are $3500. From this we know that this firmʹsA) accounting profit is $500. B) economic profit is $1,500.C) accounting profit is $11,500. D) economic profit is $500.
Q:
Supposed someone offered you the choice of two equally risky annuities, each paying $10,000 per year for five years. One is an ordinary (or deferred) annuity, the other is an annuity due. Which of the following statements is most correct?
a. The present value of the ordinary annuity must exceed the present value of the annuity due, but the future value of an ordinary annuity may be less than the future value of the annuity due.
b. The present value of the annuity due exceeds the present value of the ordinary annuity, while the future value of the ordinary annuity.
c. The present value of the annuity due exceeds the present value of the ordinary annuity, and the future value of the annuity due also exceeds the future value of the ordinary annuity.
d. If interest rates increase, the difference between the present value of the ordinary annuity and the present value of the annuity due remains the same.
e. Both answers a and d are correct.