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Economic
Q:
Which of the following could generate economic profits for perfectly competitive firms in the short run, if they initially earn zero economic profits?A) A fall in demand B) A unit tax on outputC) An increase in total fixed costs D) A decrease in input prices
Q:
Which of the following statements about the perfect competitor is INCORRECT?A) The perfectly competitive firm is always a price taker.B) The perfect competitor sells a homogeneous commodity. C) If an individual firm raises price, it will lose business.D) The products made by a perfectly competitive firm have no close substitutes.
Q:
The firmʹs short-run costs containA) only variable costs. B) only fixed costs.C) both variable and fixed costs. D) only opportunity costs.
Q:
Assuming a market rate of interest equal to 7 percent, what is the present value of $200 to be received one year from today?A) $123 B) $156 C) $187 D) $210
Q:
A proprietorship is
A) a business with annual sales of less than $50,000 a year.
B) a business owned by one individual that employs 10 or fewer workers, and has been in business less than 15 years.
C) a business owned by one individual who receives the profits and is legally responsible for the debts of the firm.
D) a form of business in which the stock of the company is closely held by members of one family.
Q:
A decrease in the price of a good causesA) the utility of the good to decrease.B) the marginal utility of the good to decrease.C) purchasing power of a personʹs income to increase.D) the nominal wealth of a person to increase.
Q:
Utility analysis is the analysis ofA) how consumers decide how to spend their money.B) the formation of tastes and preferences. C) the psychology of decision making.D) consumer decision making based on utility maximization.
Q:
Suppose that the demand for menʹs ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joeʹs total revenues?A) Total revenues will decrease.B) Total revenues will increase.C) Total revenues will not change.D) Total revenues will have no relationship to the quantity of ties demanded.
Q:
Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the supply curve that includes social costs. If the firm sets output by focusing on private costs, the per -unit external cost will equalA) P2. B) P4 - P2. C) P4 - P1. D) P2 - P1.
Q:
Typically, the major cost of a college education isA) tuition. B) books.C) foregone income. D) housing.
Q:
Featherbedding refers toA) the practice of laying off union activists.B) increased international competition and its negative impact on trade unions.C) union leaders arguing for higher wages when they know that they will not become unemployed given their seniority.D) the practice of inducing a firm to use more than the cost-minimizing level of labor.
Q:
Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. How do we know that this is not a competitive firm?A) The marginal physical product decreases as the amount of labor hired increases.B) The marginal revenue changes as output changes.C) The marginal revenue product decreases as the amount of labor increases.D) Marginal physical product cannot be computed for competitive firms.
Q:
Refer to the above table. If the price of the product is $1.50, and the marginal factor cost of an additional unit of an input is $105, how many units of labor should be hired?A) 11 B) 12 C) 13 D) 14
Q:
Cost-of-service regulation allows regulated companies to charge prices thatA) reflect the cost of regulating the industry, plus the marginal cost of the product.B) allow monopoly profits to the producer.C) reflect the actual average cost of providing the services to the customer. D) are determined by competition in other geographic markets.
Q:
A dominant strategy is a A) last-move strategy. B) losing strategy.C) playerʹs best strategy when he can make the first move.D) playerʹs best strategy regardless whatever strategies are adopted by his rivals.
Q:
A credence good is a productA) with qualities that consumers lack the expertise to assess without assistance.B) that emphasizes the features of its product.C) with characteristics that enable an individual to evaluate the productʹs quality in advance of a purchase.D) that an individual must consume before the quality can be established.
Q:
Economic inefficiency of a monopoly is indicated byA) P = ATCmin. B) P > MR. C) P > MC. D) MR = MC.
Q:
Which of the following is not true about the demand curve faced by a monopolist?A) The demand curve is downward sloping.B) The firmʹs demand curve is the same as the market demand curve. C) The marginal revenue curve is below the market demand curve.D) The demand curve is perfectly elastic.
Q:
When should a firm shut down? When should a firm go out of business?
Q:
The firm in a perfectly competitive industry is aA) price taker. B) price maker. C) price seeker. D) price dealer.
Q:
ʺDiminishing marginal product is a basic law because new workers are always less qualified than the existing workers.ʺ Do you agree or disagree? Explain.
Q:
The difference between the nominal rate of interest and the real rate of interest isA) handling charges. B) government regulatory charges.C) administrative overhead charges. D) the anticipated rate of inflation.
Q:
One advantage of a proprietorship is thatA) it is relatively easy to raise financial capital for a proprietorship.B) a proprietorship is relatively easy to form and to dissolve. C) there are limits to the possible liabilities of the owner.D) depreciation rates on capital are higher.
Q:
The real-income effect is likely to be greater whenA) the substitution effect is not very large.B) the marginal utility of the last unit is high.C) the marginal utility per dollar spent on the last unit is high.D) the good is an expensive good.
Q:
Economists infer that a consumer receives more utility from one good than another byA) giving consumers surveys about the utility they receive from the goods.B) observing the consumerʹs behavior. C) the logic of the models used.D) means of introspection and speculation.
Q:
Consider the above figure. Which of the following statements is correct?A) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D 1 is equal to the price elasticity of demand associated with demand curve D 2.B) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D 1 is less than the price elasticity of demand associated with demand curve D 2.C) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D 1 is greater than the price elasticity of demand associated with demand curve D 2.D) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand is infinite.
Q:
An externality is a situation in whichA) private costs diverge from social costs.B) internal costs diverge from private costs. C) there are no social costs.D) the cost borne by the consumer is greater than the monetary price.
Q:
Determinants of income differences include all of the following EXCEPTA) age. B) marginal productivity. C) moral hazard. D) discrimination.
Q:
A union contract requiring elevator operators in a building with automatic elevators is an example ofA) a closed shop. B) featherbedding.C) a lockout. D) a right-to-work requirement.
Q:
Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. How many workers will this firm hire if the weekly wage rate is $900?A) 26 B) 27 C) 28 D) 29
Q:
Refer to the above table. If the price of the product is $1.50, and the marginal factor cost of an additional unit of an input is $135, how many units of labor should be hired?A) 11 B) 12 C) 13 D) 14
Q:
In the above figure, an unregulated natural monopolist will produce output levelA) Q1. B) Q2. C) Q3. D) Q4.
Q:
Opportunistic behavior by oligopolies meansA) that firms cooperate in both the long run and in the short run to prevent others from entering the industry.B) that firms cooperate in the short run for current gains.C) that firms refuse to cooperate in the short run.D) that firms refuse to honor their product guarantees.
Q:
A good with qualities that consumers lack the experience to assess without assistance is calledA) a credence good. B) a search good.C) an experience good. D) a persuasive good.
Q:
Which of the following statements with respect to the monopolist is FALSE?A) A monopolist can make higher profits if it can price discriminate.B) A monopoly tends to result in a lower quantity being sold than perfect competition does.C) Monopoly is a situation in which a single firm dominates.D) A monopoly arises in a situation with few barriers to entry into the marketplace.
Q:
The demand curve facing a monopolist isA) downward sloping. B) upward sloping. C) horizontal. D) vertical.
Q:
ʺA firm should shut down immediately when it earns zero economic profits.ʺ Do you agree or disagree? Explain your answer.
Q:
Perfect competition is a market structureA) in which any firm would have serious impediments to entry or exit.B) in which individual buyers and sellers have no effect on the market price. C) resulting from individual firms selling highly differentiated products.D) where there is significant regulation and markets are always efficient.
Q:
What is the law of diminishing marginal product? Is it a realistic concept for describing the real world? Explain.
Q:
A star basketball player signs a contract that newspaper reports say is worth $20 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth
A) $20 million as reported in the papers.
B) less than $20 million since the present value of $5 million received one or more years from now is less than $5 million.
C) more than $20 million because the present value of $5 million received one or more years from now is more than $5 million.
D) either more or less than $20 million, depending on the value of the discount rate.
Q:
An advantage of proprietorships isA) the ease with which they can be formed and dissolved. B) their ability to raise large amounts of equity capital.C) the fact that their profits are not taxed.D) the breadth of management expertise that comes from having a board of directors.
Q:
When the price of a normal good decreases, people increase their consumption of the good. The reason isA) the law of diminishing marginal utility. B) the substitution and income effects. C) the substitution effect only. D) the income effect only.
Q:
The concept of utility isA) subjective so that there can be no true measurement of someoneʹs utility.B) subjective so measurement of someoneʹs utility must be done scientifically.C) objective so that devices can be developed that would measure a personʹs utility.D) objective so that psychologists can measure utility and compare one personʹs utility with that of another person.
Q:
Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demandA) is constant. B) increases continuously.C) decreases continuously. D) may either increase or decrease.
Q:
A situation in where the costs of an action are not fully borne by the two parties engaged in exchange isA) an externality. B) an internality.C) internal costs. D) a transactions cost.
Q:
Which of the following would NOT be considered a determinant of marginal productivity?A) talent B) gender C) experience D) training
Q:
The attempt to force employers to use more labor than they otherwise would, or to force employers to use labor inefficiently, is known asA) a secondary boycott. B) a sympathy strike. C) a monopsony. D) featherbedding.
Q:
Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. How many workers will this firm hire if the weekly wage rate is $770?A) 26 B) 27 C) 28 D) 29
Q:
Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 12th worker?A) $1035 B) $135 C) $90 D) $1.50
Q:
In the above figure, a regulation requiring average cost pricing would force the firm to produce at output levelA) Q1. B) Q2. C) Q3. D) Q4.
Q:
When a cartel breaks down and its members start cheating, the behavior in the industry becomes aA) noncooperative game. B) zero-sum game.C) high stakes game. D) positive sum game.
Q:
An experience good is a productA) with qualities that consumers lack the expertise to assess without assistance. B) that emphasizes the features of its product.C) with characteristics that enable an individual to evaluate the productʹs quality in advance of a purchase.D) that an individual must consume before the quality can be established.
Q:
Referring to the above graphic, which of the following statements is FALSE?A) In panel (a), a competitive situation is shown in which equilibrium is established at the intersection of D and S at point E.B) In panel (a), the equilibrium price is Pe and the equilibrium quantity Qe.C) The price the monopolist charges in panel (b) at Pm, is lower than the price that the competitive producer charges.D) The monopolist produces at Qm, and charges a price of Pm, while maximizing profits at the intersection of MC and MR.
Q:
A monopolist facesA) a perfectly elastic demand curve. B) a perfectly inelastic demand curve.C) the market demand curve. D) a two-tiered demand curve.
Q:
What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.
Q:
Your local farmer has many competitors and exists in a market structure known as perfect competition. This means that price is determined outside of the individual farmerʹs ability to charge a price higher than the going market for a bushel of wheat, hence the farmer isA) a price maker and can therefore charge different customers different prices.B) always able to price produce above the competition and earn a larger profit. C) never able to determine any prices he charges for anything, such as soybeans. D) a price taker and cannot affect the market price of wheat.
Q:
Graphically, what does the marginal product curve for a labor input look like? Explain in words.
Q:
The greater the interest rate,A) the greater the present value of a sum to be received a year in the future. B) the greater the opportunity cost of another dollar of current consumption. C) the more a dollar invested today will be worth a year from now.D) the lower the discount rate.
Q:
By definition, a proprietorship isA) owned by many shareholders.B) a large manufacturing concern. C) owned by a single individual.D) managed by a large group called the ʺboard of directors.ʺ
Q:
The price of a good that Joe is currently consuming has increased.A) Joe has experienced a decrease in purchasing power.B) Joe will experience a shift in the demand curve of the good whose price has increased. C) Joe will stop consuming this good.D) Joe will experience increasing marginal utility.
Q:
A good synonym for ʺutilityʺ isA) marginal. B) need. C) practical. D) satisfaction.
Q:
Moving upward along a downward sloping straight -line demand curve, as the price of the product goes up,A) the price elasticity of demand does not change.B) the price elasticity of demand goes from being inelastic to being elastic.C) the price elasticity of demand goes from being elastic to being inelastic. D) the price elasticity of demand goes from negative to positive.
Q:
A situation in which a private cost diverges from a social cost isA) internal costs. B) an externality.C) an internality. D) a transactions cost.
Q:
Inheritance accounts for aboutA) 5 percent of income inequality. B) 10 percent of income inequality.C) 15 percent of income inequality. D) 30 percent of income inequality.
Q:
The practice of forcing employers to use more labor than they would otherwise use is calledA) railroading. B) featherbedding.C) dumping. D) bootstrapping.
Q:
Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. How many worker will this firm hire if the weekly wage rate is $1350?A) 28 B) 25 C) 26 D) 27
Q:
Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 11th worker?A) $1.50 B) $13.64 C) $150 D) $900
Q:
Which of the following is NOT an objective of economic regulation?A) to regulate the prices enterprises are allowed to chargeB) to fix prices so that they are never allowed to riseC) to keep rates of return in an industry at a competitive levelD) to prevent monopoly profits
Q:
An action that is the best choice under all conditions is known as theA) profit-maximizing strategy. B) prisonerʹs dilemma. C) tit-for-tat strategy. D) dominant strategy.
Q:
A good that people must actually consume before they can determine qualities is calledA) a credence good. B) a search good.C) an experience good. D) a persuasive good.
Q:
A monopolist charges a price that is and produces than a perfect competitor.A) lower; less B) higher; less C) higher; more D) lower; more
Q:
The monopolistʹs marginal revenue is less than price since
A) additional units can only be sold if the price is lowered on all units sold.
B) the demand function is horizontal.
C) average revenue is also less than price.
D) average total cost is declining.
Q:
What is the short-run break-even price? What are economic profits at this price? Why would a firm be willing to operate permanently at this price?
Q:
Clothing retailers have faced greater competition in recent years as more firms have entered the clothing market. Some of the competition has come from foreign competitors, but much of it is domestic competition. As a result there is much competition in markets for many types of clothing andA) individual buyers and sellers cannot affect the market price because it is determined by the market forces of demand and supply.B) there are no other implications.C) firms have a great degree of flexibility in pricing their products because these products can be sold at a high profit level.D) there are relatively few buyers and sellers in the market, and one individual firm can determine the market price.
Q:
What is the law of diminishing marginal product?
Q:
A firm is considering an investment that will cost $2 million today and $2 million a year from now. It will generate revenues of $1 million a year for five years, beginning two years from now. If the interest rate is 10 percent, the firm shouldA) not make the investment because the present value of the net revenues is less than the present value of the investment spending.B) not make the investment because the present value of the net revenues is less than $4 million.C) make the investment because the present value of the net revenues is greater than the present value of the investment.D) make the investment because the project will generate a net profit of $1 million.
Q:
The disadvantages of proprietorships includeA) limited liability for the owner.B) double taxation of business profits.C) the fact that the proprietorship can continue even after the owner dies. D) the fact that the proprietor is solely responsible for all the firmʹs debts.
Q:
The change in peopleʹs purchasing power that occurs when the price of one good that they purchase changes is theA) law of diminishing marginal utility. B) real-income effect. C) substitution effect. D) price income effect.
Q:
The want-satisfying power of a good or service is known asA) purchasing power. B) utility.C) consumer optimum. D) principle of substitution.
Q:
A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority shouldA) leave the fare as it is. B) raise the fare.C) lower the fare. D) charge $1.10.