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Economic
Q:
What is a price taker? Discuss the assumptions used to obtain the perfectly competitive model.
Q:
Which of the following would NOT be considered a fixed cost of production?A) Wages paid to laborB) The opportunity cost of capitalC) Interest payments on a loanD) Insurance payments on plant and equipment
Q:
Present value isA) unrelated to the rate of interest. B) lower the longer the time horizon.C) not expressed in todayʹs dollars. D) opposite the time value of money.
Q:
Corporations account forA) the largest proportion of business revenues generated in the United States.B) the largest amount of taxes paid to the U.S. government. C) the largest number of firms in the United States.D) the smallest amount of revenues in the United States.
Q:
With a given level of money income, when the price of a product that a consumer buys declines, the purchasing power of your money incomeA) decreases. B) increases.C) is unchanged.D) can increase or decreases depending on the goods being consumed.
Q:
John has just eaten another potato chip and his total utility increased. This means that Johnʹs marginal utility for this additional potato chip isA) positive. B) negative. C) zero.D) not determinable without more information.
Q:
When demand is unit elastic, a change in price will causeA) a change in total revenue in the same direction.B) a change in total revenue in the opposite direction. C) no change in total revenue.D) a change in total revenue in either direction depending on whether the price is increasing or decreasing.
Q:
The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads toA) lower priced items and increased quantity.B) lower priced items and a decline in quantity. C) higher priced items and increased quantity. D) higher priced items and a decline in quantity.
Q:
When it comes to productivity, some economists argue thatA) unions have caused a decrease in productivity by excessive staffing and makework requirements.B) through the use of featherbedding unions have been responsible for productivity increases.C) the passage of the Taft-Hartley Act has led to a significant decrease in productivity. D) the unionʹs insistence on profitability laborsaving devices has led to an increase in productivity.
Q:
In constructing the monopolistʹs input demand curve, which of the statements is FALSE?A) The demand curve has a negative slope due to the law of diminishing marginal product.B) Marginal revenue is always positive.C) A monopoly restricts output and hires fewer units of labor than a perfectly competitive firm.D) The supply curve a monopoly faces is horizontal because the monopoly is a price taker.
Q:
For a perfectly competitive firm, the value of the marginal product isA) the same thing as marginal factor cost.B) the same thing as marginal physical product.C) marginal physical product times the product price.D) marginal physical product times the wage rate.
Q:
One problem that might occur as a result of economic regulation isA) the firm may be earning more than a normal rate of return on investment.B) the quality of service might be lowered. C) that social regulation may follow.D) the demand for the good may be greater than the supply.
Q:
The main objective of the members of a cartel is to
A) earn economic profits. B) produce efficiently. C) make the industry more competitive. D) obtain a patent.
Q:
Persuasive advertising is the type of advertising thatA) is used exclusively on television. B) is used exclusively on radio.C) emphasizes the features of its product.D) is used to induce a consumer to discover previously unknown tastes and preferences.
Q:
If the marginal cost curve of all identical firms in a perfectly competitive industry are horizontal at the same per-unit cost, then the marketʹs consumer surplus equals the areaA) beneath the demand curve and above the marginal cost curve.B) above the demand curve and beneath the marginal cost curve.C) below the marginal cost curve. D) above the demand curve.
Q:
A monopolist wishing to increase its profit has just discovered that lowering its price and selling more output yielded the desired result. Profit increased. Based on this, we can conclude that the cost of the additional production isA) greater than the revenue from the additional production.B) precisely equal to the revenue from the additional production.C) less than the revenue from the additional production.D) there is no way to answer this because you have not given us the marginal revenue and marginal cost data.
Q:
In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P2 is equal toA) Q1 + Q2. B) Q1 + Q3. C) Q2 + Q4. D) Q4 - Q2.
Q:
A perfectly competitive market has A) high barriers to entry or exit. B) homogeneous products.C) to do a lot of advertising to attract buyers.D) few firms.
Q:
In economics, a fixed cost is a cost thatA) is present only in the short run.B) goes up as the level of output goes up.C) goes down as the level of output goes up.D) does not vary with the level of output.
Q:
The greater the risk of nonrepayment of a loan, other things being equalA) the longer is the repayment term.B) the lower is the charged loan fees. C) the higher is the rate of interest.D) the smaller is the amount of collateral that is used.
Q:
Of the owners of the following firms, which does not have unlimited liability for the businessʹ debts?A) Roy Rayʹs Grocery Store, Roy Ray, proprietorB) The partnership of Reese and Jones, Attorneys-at-LawC) The Huber CorporationD) Wrenʹs Feed and Seed Store, a proprietorship
Q:
If you regularly spend $100 a month on gasoline and the priceof gasoline doubles, your purchasing power hasA) increased. B) remained constant. C) became stable. D) decreased.
Q:
The rate of change in total utility equalsA) marginal utility.B) the change in marginal utility associated with eating all the quantities a person can handle. C) the change in marginal utility divided by the change in quantity.D) the rate of change in marginal utility divided by the price.
Q:
All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPTA) when market demand is elastic, if the market price declines, then total revenues will rise. B) when market demand is unit elastic, if the market price rises, then total revenues will not change.C) when market demand is inelastic, if the market price falls, then total revenues will decrease.D) when market demand is inelastic, if the market price rises, then total revenues will decrease.
Q:
The inclusion of external costs in the decision making process determining equilibrium price and quantity leads toA) lower priced items and increased quantity.B) lower priced items and a decline in quantity.C) higher priced items and increased quantity. D) higher priced items and a decline in quantity.
Q:
The age-earnings cycle is an earnings profile of an individual throughout the personʹs lifetime. The profile shows thatA) earnings usually peak at age 25 and then decline.B) earnings gradually rise until they peak around age 50.C) earnings and age have no particular correlation. D) younger workers have the most productivity.
Q:
An example of featherbedding is
A) advertising that encourages consumers to buy union -made goods.
B) union requirements that forbid the use of certain laborsaving equipment.
C) lobbying Congress to get higher tariffs.
D) the requirement that all construction workers who work on a government -financed project receive the union wage rate regardless if they are in the union or not.
Q:
In the above table, if the marginal factor cost is $96, how many workers would be hired?A) 3 B) 4 C) 5 D) 2
Q:
The marginal revenue product of labor declines as the number of workers increases becauseA) firms hire the most efficient workers first and the least efficient workers last.B) firms must lower prices for the final product when they want to sell more units. C) of the law of diminishing marginal product.D) of diseconomies of scale.
Q:
Which of the following is a possible market solution to the lemons problem?A) Producers might offer product guarantees and warranties.B) Producers might be required to meet certain legal standards to obtain licenses granting the right to sell their products.C) Government agencies might be charged with directly overseeing production and distribution of certain products.D) Liability laws might be established to ensure that firms selling certain products must face penalties in the event the products function poorly.
Q:
Which of the following is not true about a cartel?A) Members earn economic profits.B) Members experience large economies to scale relative to industry demand.C) Cartels will set common prices for their members. D) Members of a cartel will have production quotas.
Q:
Informational advertising is the type of advertising that
A) is used exclusively on television.
B) is used exclusively on radio.
C) emphasizes the features of a product.
D) is used to influence a consumerʹs tastes and preferences.
Q:
In a perfectly competitive market in which identical firms face the same horizontal marginal cost curve, if demand increases, then the amount of consumer surplus willA) increase. B) decrease.C) become negative. D) not change.
Q:
Successive downward movements along the demand curve for the product of a monopolist always generate successiveA) increases in the monopolistʹs marginal revenue. B) increases in the monopolistʹs average total costs.C) decreases in the additional per-unit costs incurred by the monopolist.D) decreases in the additional per-unit revenues earned by the monopolist.
Q:
In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P1 is equal toA) Q1 + Q2. B) Q1 + Q3. C) Q2 + Q4. D) Q4 - Q2.
Q:
Which of the following is closest to a perfectly competitive market?A) the soda pop market B) the market for breadC) the market for sugar D) the market for fast food
Q:
Short-run total cost is defined asA) the sum of marginal cost and total variable cost.B) price of labor per unit multiplied by the number of labor units. C) total fixed cost plus total variable cost.D) total capital cost only.
Q:
The higher the expected rate of inflation,
A) the lower is the nominal rate of interest.
B) the higher is the real rate of interest.
C) the higher is the nominal rate of interest.
D) the higher the real and nominal rates of interest.
Q:
Comparing proprietorships with partnerships, which is true?A) In both cases, profits are taxed only once.B) Partnerships outnumber proprietorships 2-to-1 in the United States.C) Proprietorships generally end with the death of the owner, but partnerships continue as long as at least one partner survives.D) A proprietor faces unlimited liability for her firmʹs debts, but in a partnership each partner is only responsible for an even share of the firmʹs indebtedness.
Q:
When consumers shift away from relatively higher price goods and services in favor of those that are less expensive, this is known as theA) principle of utility.B) principle of substitution. C) principle of supply.D) principle of increasing opportunity costs.
Q:
The change in the total utility as a result of increasing consumption by one unit is known asA) marginal utility. B) average utility. C) proportional utility. D) utils.
Q:
Total revenue isA) price quantity. B) change in price change in quantity. C) change in price quantity. D) price change in quantity.
Q:
A good that has social costs that are less than private costs has a quantity that isA) too high. B) too low. C) just right. D) equal to zero.
Q:
The typical age-earnings cycle shows thatA) there is a positive relationship between age and earnings that eventually turns into a negative relationship.B) there is a constant positive relationship between age and earnings. C) there is a constant negative relationship between age and earnings. D) there is no relationship between age and earnings.
Q:
Any practice that forces employers to use more labor than they would otherwise use isA) closed shop. B) monopolistic exploitation. C) a craft union. D) featherbedding.
Q:
In the above table, if the marginal factor cost is $48, how many workers would be hired?A) 3 B) 4 C) 5 D) 6
Q:
The addition to revenue obtained from firing an additional unit of labor isA) total product. B) marginal revenue product.C) marginal factor cost. D) marginal physical product of labor.
Q:
ʺToday the U.S. telecommunications industry remains heavily regulated by the government as it was some 30 years ago.ʺ Do you agree or disagree? Why?
Q:
An association of producers in an industry that agree to set common prices and output quotas to prevent competition isA) a tariff. B) a patent. C) economies of scale. D) a cartel.
Q:
The type of advertising that is used to induce a consumer to discover a previously unknown taste for an item is known asA) informational advertising. B) persuasive advertising. C) search advertising. D) experience advertising.
Q:
In a perfectly competitive market, consumer surplus typically isA) positive. B) negative. C) zero.D) undefined.
Q:
To induce an increase in the quantity demanded of its product, a monopolist must reduce the
A) quality of its product and thereby generate a downward shift its ATC curve.
B) price of its product and thereby generate a rightward shift in its demand curve.
C) price of its product and thereby generate a rightward movement along its demand curve.
D) quality of its product and thereby generate a downward movement along its ATC curve.
Q:
Assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to the sum of theA) AVC curves above minimum AVC. B) ATC curves above minimum ATC. C) MC curves above minimum AVC. D) MC curves above minimum ATC.
Q:
Which of the following is closest to a perfectly competitive market?A) the pizza marketB) the market for breakfast cerealC) the market for corn D) the market for automobiles
Q:
Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?A) $60 B) $70 C) $120 D) $84
Q:
What is the real (adjusted for inflation) present value of $104.25 that you could receive one year from now, given that the rate of interest is 4.25 percent and the anticipated rate of inflation is 1 percent?A) $99.05 B) $100.97 C) $107.64 D) $100.00
Q:
Compared to a proprietorship, an advantage of a partnership is
A) that profits are not taxed twice.
B) double taxation.
C) the ability to take advantage of greater specialization.
D) the limited liability of the partners.
Q:
If a college student stays home and watches a rented DVD for $5 rather than going out to a $10 movie, this is an example of theA) utility effect. B) value effect. C) substitution effect. D) income effect.
Q:
Marginal utility isA) the utility received by the last consumer of a good.B) the total utility received from consuming a given quantity of a good divided by the number of units consumed.C) the change in total utility from consuming an additional unit of a good.D) the utility received from consuming the first unit of a good.
Q:
When demand is elastic,A) changes in price and changes in total revenue move in the same direction.B) there is no relationship between changes in price and changes in total revenue.C) changes in price and changes in total revenue move in opposite directions. D) for any change in price, total revenue will not change.
Q:
A good that has social costs that are equal to private costs has a price that isA) too high. B) too low.C) just right. D) equal to marginal cost.
Q:
All of the following contribute to income inequality EXCEPTA) differences in education and training. B) differences in job tastes.C) differences in talent. D) government transfer programs.
Q:
Featherbedding refers to
A) training programs initiated by the unions to make the less -skilled workers more productive.
B) attempts by management to reduce workersʹ interest in a union.
C) the practice that forces employers to use more labor than they would otherwise.
D) the amount of the union premium.
Q:
In the above table, if the marginal factor cost is $20, how many workers would be hired?A) 3 B) 4 C) 5 D) 6
Q:
The marginal revenue productA) represents the incremental contribution to the firmʹs total revenues obtained from an increase in a variable input.B) always increases when there is an increase in a variable input.C) gives the increase in cost when there is an increase in a variable input.D) gives the change in total product when an additional unit of a good is hired.
Q:
Distinguish between cost-of-service regulation and rate-of return regulation. What problem is inherent in both types of regulation?
Q:
An example of a cooperative game would beA) oligopoly. B) monopolistic competition.C) a cartel. D) perfect competition.
Q:
The type of advertising that emphasizes the features of its product isA) informational advertising. B) persuasive advertising. C) search advertising. D) experience advertising.
Q:
For a perfectly competitive market in which firms face an identical constant marginal costs, the amount of consumer surplus increases ifA) market demand decreases. B) market demand increases. C) marginal cost increases.D) none of the above: insufficient information to answer.
Q:
If a monopolist wants to increase the amount it sells, itA) will keep the price the same. B) must lower the price on all units. C) must accept lower profits. D) must lower the cost of production.
Q:
If price is below average variable costs at all rates of output, the quantity supplied by a perfectly competitive firm will equal
A) zero.
B) the rate of output where price equals marginal cost.
C) the rate of output associated with the break-even point.
D) the rate of output where marginal revenue equals average fixed costs.
Q:
Which of the following is closest to a perfectly competitive market?A) the computer software market B) the market for handmade guitarsC) the market for broccoli D) the market for athletic shoes
Q:
Which one of the following statements is FALSE?A) TC = TFC + TVC B) ATC = AFC + AVCC) AFC = TFC divided by Q D) MC = TC divided by Q
Q:
What is the present value of $104.25 that you could receive one year from now, given that the rate of interest is 4.25 percent?A) $108.50 B) $0.00 C) $4.25 D) $100.00
Q:
In a partnership, debts accumulated by one partnerA) are the responsibility of that partner only.B) are the responsibility of the other partners as well.C) are the responsibility of all the employees of the partnership, regardless of whether those employees are partners.D) are the responsibility of the other partners only up to the amount each partner initially invested in the partnership.
Q:
Which of the following statements is FALSE regarding consumer choice?A) Each change in price has a substitution effect and a real income effect.B) When price falls, the consumer chooses in favor of the cheaper good.C) Diminishing marginal utility is one reason for a downward sloping demand curve.D) Purchasing power has an inverse relationship with the rise in income.
Q:
In cardinal utility analysisA) numbers can be assigned to utility.B) it is recognized that numbers can not be assigned to utility.C) the concept of marginal utility exists while in ordinal utility analysis marginal utility does not exist.D) marginal utility always increases as more of a good is consumed.
Q:
If the government places a $0.50 tax on an item for which demand is perfectly elasticA) the entire tax will be paid by the consumer.B) the tax will be split equally between the consumer and producer, with each paying exactly $0.25.C) most of the tax will be paid by the consumer. D) the entire tax will be paid by the producer.
Q:
A good that has social costs that exceed private costs has a quantity that isA) too high. B) too low.C) just right. D) the best society can do.
Q:
If a goal of a nationʹs residents is to increase marginal productivity, they should increaseA) expenditures on education. B) the inheritance tax.C) exports. D) the marginal propensity to consume.