Q&A Hero

Q: What does a monopolistʹs demand curve for labor look like? How does it compare to the market demand curve for a competitive industry? What does the supply curve of labor to a monopolist look like? Explain.

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. The marginal factor cost of labor is $200. To get the firm to hire 8 workers, theA) firm must be able to reduce wages below the marginal factor cost. B) price of the good must be $8.C) eighth worker must be at least as productive as the seventh worker was.D) wage rate must be a fraction of the marginal factor cost of labor.

Q: Which of the following is NOT a likely market solution to the lemons problem?A) average cost pricing B) product warrantyC) industry standardD) product certification

Q: Cheating in a cartel is more likely to occur if the industryA) has a large number of firms. B) has homogeneous products. C) has easily observable prices D) has little variation in prices.

Q: When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this isA) informational advertising. B) direct market advertising. C) indirect market advertising. D) persuasive advertising.

Q: If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?A) Consumer surplus decreases, producer surplus increases and a deadweight loss is created.B) Consumer surplus decreases, producer surplus decreases and a deadweight loss is created. C) Consumer surplus increases, producer surplus decreases and a deadweight loss is created. D) Consumer surplus increases, producer surplus increases and a deadweight loss is created..

Q: The demand curve for a monopolist isA) the industry demand curve.B) the same as the demand curve for a perfectly competitive firm. C) a perfectly inelastic demand curve.D) a unitary elastic demand curve.

Q: The short-run industry supply curve is found byA) taking the inverse of the industry demand curve.B) horizontally summing the average total cost curve of all firms in the industry. C) adding up the quantities supplied at each price by each firm in the industry.D) adding up the quantities supplied at each price by each of the firms in the industry that are making a profit.

Q: If a firm is a perfect competitor, then A) the demand curve for its product is perfectly elastic. B) it can independently set the price of the product it sells without regard to what other firms in the market are doing. C) it is impossible for the firm to earn short -run economic profits. D) its marginal cost will exceed marginal revenue at the optimal level of output.

Q: Which of the following statements about a firmʹs short-run variable costs is correct?A) They increase as the level of output decreases.B) They typically include the cost of workersʹ wages. C) They include the costs of plant and equipment.D) They are always a greater expense than are fixed costs.

Q: Last year, the nominal interest rate was less than the anticipated rate of inflation.A) This means that not enough loans were made by banks. B) This means that the real interest rate was negative.C) This means that the real interest rate was very high. D) This scenario is not possible.

Q: The form of business organization responsible for generating the greatest portion of business revenues in the United States is theA) corporation. B) dual proprietorship. C) proprietorship. D) partnership.

Q: If the price of a pizza slice falls, Tom canA) buy more pizza with his paycheck. B) buy more soft drinks with his paycheck.C) no longer afford pizza on his paycheck. D) Either A or B is possible.

Q: Sam loves cookies. She receives 200 utils for one cookie, 360 for two cookies, 480 for the third, 560 for four cookies, and 600 for five cookies. The marginal utility of the third cookie isA) 120 B) 480C) 80 D) unable to determine

Q: Use the above figure. When the price increases from $2 to $10, the absolute price elasticity of demand isA) 0.67. B) 1.50. C) 0.25. D) 1.00.

Q: What are the private costs of driving an automobile? What are the external costs?

Q: ʺThe typical age-earning cycle provides evidence of economic discrimination by age.ʺ Do you agree or disagree? Why?

Q: Economists argue that the union wage advantageA) has been estimated to be 100% in the private sector.B) in the private sector is a 4% increase in wages for union workers over nonunion workers. C) reached its height in 2000 in the private sector.D) has been close to zero since World War II in the private sector.

Q: ʺOther things being equal, the monopolist hires fewer workers than would be hired than a perfectly competitive industry.ʺ Do you agree or disagree? Why?

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. Suppose the marginal revenue product of the 5th worker is $800. This implies thatA) the price of the good is $5.33. B) the price of the good is $8.C) the price of the good is $70.D) we cannot tell what the price of the good is without more information.

Q: The lemons problem is a situation ofA) perfect competition. B) asymmetric information.C) creative response. D) a natural monopoly.

Q: Which of the following is LEAST likely to be a reason for firms to form a cartel? A) to maximize profits of the cartel B) to raise competition among firms in the cartel C) to cut back output of the cartel D) to set common prices among firms in the cartel

Q: The type of advertising used for an experience good isA) informational advertising. B) persuasive advertising.C) search advertising. D) experience advertising.

Q: If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?A) Consumer surplus increases, and the previously existing deadweight loss decreases.B) Consumer surplus increases, and the previously existing deadweight loss increases.C) Consumer surplus is eliminated, and an equal -sized deadweight loss is created. D) Consumer surplus decreases in size, and a deadweight loss is created.

Q: The demand curve faced by the monopolistA) has a constant price elasticity. B) is the industry demand curve.C) is identical to the firmʹs MR curve. D) is identical to the firmʹs TR curve.

Q: A perfectly competitive firm is producing zero units of output in the short run. We know that price is A) below the minimum point of its average fixed cost curve. B) below the minimum point of its average variable cost curve. C) below the minimum point of its average total cost curve. D) between the minimum points of its average total cost curve.

Q: Under the perfectly competitive market structure, the demand curve of an individual firm isA) perfectly inelastic. B) downward sloping. C) relatively inelastic. D) perfectly elastic.

Q: When output is 100 units, the firmʹs total fixed cost is $500. What will this firmʹs total fixed cost be if output doubles to 200 units?A) $1,000B) $500C) $250D) Canʹt tell from the information provided

Q: The ABC Corporation earned a real rate return of 4.5 percent on an investment. In the economy, the nominal rate of interest was 6 percent and the rate of inflation was 3 percent. We can conclude thatA) the investment was unprofitable. B) the investment was profitable.C) the real rate of interest was 9 percent. D) the real rate of interest was 1.5 percent.

Q: In general, which form of business organization has the greatest capacity to raise large sums of financial capital?A) Sole proprietorships B) PartnershipsC) Limited partnerships D) Corporations

Q: If the price of a slice of pizza falls from $2 to $1, a pizza -loving consumer willA) see her purchasing power fall.B) see her purchasing power rise.C) substitute more Chinese food for pizza.D) spend more on soft drinks and less on pizza.

Q: A well-known athlete loves cupcakes. He receives 200 utils for the first cupcake, an additional 160 for the second, an additional 120 for the third, another 80 for the fourth, and another 40 for the fifth. The marginal utility of the fourth cupcake is and the total utility of consuming four cupcakes is .A) 40; 80 B) 80; 600 C) 80; 560 D) 40; 40

Q: Use the above figure. When the price increases from $2 to $10, total revenueA) increases from areas A + B to areas B + C and demand is inelastic. B) increases from areas B + C to areas A + B and demand is inelastic. C) increases from areas B + C to areas A + D and demand is elastic. D) increases from areas C + D to areas B + A and demand is elastic.

Q: Why donʹt people take into consideration the external costs of their actions and reduce the amount of externalities?

Q: Earnings usually reflect a personʹs productivity. What are factors that cause differences in productivity across people so that earnings differ too?

Q: A benefit of unions is that theyA) increase firm profits. B) increase the stability of the workforce. C) increase wage inequality. D) restrict the labor market.

Q: If the demand for a monopolistʹs product increases, itsA) marginal revenue increases, making it more profitable to hire more workers.B) marginal revenue increases, making it more profitable to hire fewer workers. C) marginal revenue decreases, making it more profitable to hire more workers. D) marginal revenue decreases, making it more profitable to hire fewer workers.

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. Suppose the marginal revenue product of the 7th worker is $1100. This implies thatA) the price of the good is $1. B) the price of the good is $8. C) the price of the good is $20.D) we cannot tell what the price of the good is without more information.

Q: Which of the following is the outcome of the lemons problem in the used -car market?A) Only low-quality cars will be traded in the market. B) Only high-quality cars will be traded in the market.C) Both low-quality and high-quality cars will be traded in the market. D) No cars will be traded in the market.

Q: An association of producers that fixes common prices and output quotas is known as a A) cartel. B) common selling organization. C) joint-marketing arrangement. D) trade association.

Q: The type of advertising used for a search good isA) informational advertising. B) persuasive advertising.C) search advertising. D) experience advertising.

Q: A deadweight loss occurs in aA) monopoly.B) perfectly competitive market.C) market in which the market clearing price of a good equals the marginal cost of producing it.D) market in which the market clearing price of a good is below the marginal cost of producing it.

Q: Which of the following would best describe the demand curve faced by a monopoly firm? A) horizontal line at the market price B) vertical line at the output level C) same as the market demand curve D) same as the perfect competitorʹs demand curve

Q: Refer to the above figure. The competitive firmʹs short run supply curveA) starts at A and goes along the MC curve as quantity increases.B) starts at B and goes along the MC curve as quantity increases. C) starts at A and goes along the AVC curve as quantity increases. D) starts at B and goes along the ATC curve as quantity increases.

Q: ʺA market is said to be perfectly competitive when consumers can tell that some products are of better quality than others.ʺ Do you agree or disagree? Why?

Q: With a given plant size, an increase in output will NOT result in an increase inA) total cost. B) average fixed cost.C) total fixed cost. D) average variable cost.

Q: If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in one year?A) $105,000 B) $110,000 C) $100,000 D) $102,000

Q: The main advantage of a corporate form of organization is that A) shareholders have limited liability. B) shareholders have unlimited liability. C) shareholders are not subject to double taxation. D) all corporate profits must be distributed as dividends.

Q: If the price of coffee rises relative to all other prices, consumers are likely toA) buy more coffee. B) buy more tea.C) buy less coffee and less tea. D) buy less tea.

Q: Karen has decided that she would enjoy eating another cookie. Which of the following statements is consistent with Karenʹs decision?A) Karenʹs marginal utility has decreased with a corresponding decrease in total utility. B) Karenʹs marginal and total utility remain unchanged.C) Karenʹs marginal utility has decreased but it is unclear what has happened to total utility.D) Karenʹs total utility has increased but it is unclear what has happened to her marginal utility.

Q: When the price of gasoline is $2.20 per gallon, 11 million gallons are demanded, and when the price of gasoline goes up to $2.60 per gallon, 10 million gallons are demanded. The gasoline in this range has a(n)A) elastic demand. B) inelastic demand.C) unit elastic demand. D) perfectly elastic demand.

Q: What is an externality?

Q: What is the age-earnings cycle? What is the typical age-earnings profile for a U.S. resident?

Q: Critics of unions tend to focus on the fact that unionsA) tend to generate higher wages. B) reduce profits.C) are politically active. D) engage in restrictive labor practices.

Q: When a firm has monopoly power, itA) hires fewer workers because its marginal revenue lies below the demand curve. B) hires more workers because its marginal revenue lies below the demand curve. C) hires fewer workers because its marginal revenue lies above the demand curve. D) hires more workers because its marginal revenue lies above the demand curve.

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. If the price of the good produced is $5, the marginal revenue product of the 7th worker isA) $125. B) $385. C) $5000. D) $55.

Q: When consumers have less information about a product than do sellers, then this is the situation ofA) asymmetric information. B) symmetric information. C) caveat emptor. D) a market failure.

Q: In a cartel, firms jointly act asA) a monopolistic competitive firm. B) a perfectly competitive firm.C) a monopoly firm. D) an oligopolistic firm.

Q: Persuasive advertising is mostly used forA) a logo good. B) a search good.C) an experience good. D) a persuasive good.

Q: The portion of consumer surplus that no one in society is able to obtain in a situation of monopoly is known asA) a market failure. B) a deadweight loss.C) an unrealized loss. D) a market externality.

Q: For a monopolist, the reason that marginal revenue is less than price isA) because of the perfectly elastic demand curve that the monopolist faces.B) because the monopolist must lower the price of the good in order to sell an additional unit.C) because of the U-shaped average revenue curve. D) because of the lack of competition in the market.

Q: The short-run supply curve of a perfect competitor isA) its average variable cost curve.B) its marginal revenue curve.C) its entire marginal cost curve.D) its marginal cost curve equal to or above the minimum point on its average variable cost curve.

Q: What are the main characteristics of a perfectly competitive market?

Q: All of the following are most likely to be fixed costs EXCEPT the cost relating toA) insurance. B) taxes. C) rent. D) packaging.

Q: The real interest rate is theA) nominal interest rate plus the anticipated interest rate.B) nominal interest rate minus the anticipated interest rate. C) nominal interest rate plus the anticipated inflation rate. D) nominal interest rate minus the anticipated inflation rate.

Q: Which of the following is NOT a characteristic of a corporation?A) Limited liability for shareholders B) Double taxationC) Separation of ownership problems D) Limited ability to raise capital funds

Q: When the price of a good that a person is consuming falls, other things being constant, there isA) a decline in real income. B) a decline in purchasing power. C) a real income effect. D) no change in purchasing power.

Q: John has just eaten another potato chip and his total utility decreased. This means that Johnʹs marginal utility for this additional potato chip isA) positive. B) negative. C) zero.D) not determinable without more information.

Q: If the price of a good increases and the total revenue remains the same, the demand for the good isA) elastic. B) inelastic.C) unit elastic. D) perfectly elastic.

Q: What are social costs? How do they differ from private costs?

Q: Why doesnʹt the age-earning cycle continuously increase until retirement age?

Q: Evidence in support of the hypothesis that unions increase the productivity of union workers isA) the fact that union wages are greater than nonunion wages. B) there is an excess supply of labor at the union wage rate.C) that unionized firms face lower turnover rates than nonunion firms do. D) that most contracts are settled without a strike.

Q: The MRP curve for a monopolist in the product market isA) the same as the MRP curve for a perfectly competitive firm in the product market.B) to the left and below the MRP curve for a perfectly competitive firm in the product market.C) to the right and above the MRP curve for a perfectly competitive firm in the product market.D) upward sloping and below the MFC curve for a perfectly competitive firm in the product market.

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output00694512007100024208102536209103547701010405870 Refer to the above table. If the price of the good produced is $5, the marginal revenue product of the 5th worker isA) $3350. B) $670. C) $500. D) $100.

Q: The potential for asymmetric information to bring about a general decline in product quality in an industry is known as the problem.A) moral hazard B) liability C) capture D) lemons

Q: A group of producers that agree to coordinate their production is called aA) cartel. B) monopoly.C) free market competition. D) vertical merger.

Q: Informational advertising is mostly used forA) a logo good. B) a search good.C) an experience good. D) a persuasive good.

Q: ʺUnlike a monopoly, consumer surplus in a perfectly competitive market is zero.ʺ Do you agree or disagree? Why?

Q: For a monopolist, A) marginal revenue is less than price. B) marginal revenue equals price. C) marginal revenue is greater than price. D) marginal revenue equals average revenue.

Q: A perfectly competitive industryʹs short-run supply curve is best described as A) the upward sloping portion of the industryʹs marginal cost curve. B) horizontal. C) perfectly inelastic. D) the horizontal summation of the individual firmsʹ supply curves.