Q&A Hero

Q: An externality exists whenA) there are private costs. B) there are internal costs.C) there are external costs. D) there are opportunity costs.

Q: Which of the following does NOT contribute to the marginal productivity of workers?A) discrimination B) talent C) experience D) education

Q: The union wage differentialA) varies substantially across employment sectors. B) increases during expansions.C) has remained fairly constant over the past 30 years.D) is greater for private sector employees than for government sector workers.

Q: Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. What does the marginal revenue product equal when 28 workers are hired a week?A) $1040 B) $900 C) $210 D) $7.50

Q: Refer to the above table. Which of the following statements is correct?A) The table follows economic principles because in an increasing cost industry, increases in a variable input will lead to increase in output.B) The table does not follow economic principles because in an increasing cost industry, increases in a variable input will lead to decrease in output.C) The table follows economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to a decrease in the marginal physical product.D) The table does not follow economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to an increase in the marginal physical product.

Q: Regulation that keeps the rate of return in the industry competitive is known asA) rate-of-return regulation. B) cost-of-service regulation. C) social regulation. D) deregulation.

Q: The prisonerʹs dilemma shows thatA) players are better off if they act independently.B) monopolies are beneficial to society. C) people will always cheat.D) players would be better off if they cooperated.

Q: A search 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: A simple way of describing the social cost of monopoly is to say that it A) produces too much. B) makes too much money. C) has too much political power. D) restricts output and charges a higher price than a perfectly competitive firm.

Q: For the monopolist, marginal revenue isA) equal to price.B) less than average revenue since price must be lowered to sell additional units. C) greater than price.D) not a consideration in the firmʹs pricing.

Q: Using the above figure, the price facing the perfectly competitive firm in the long run will beA) P1. B) P2. C) P3. D) P4.

Q: Malfeasance at Enron, a Houston-based energy firm, led to overstatement of revenues by almost $92 billion. As Enron closed its operations, U.S. energy prices remained stable. This may have been evidence thatA) Enron could charge whatever price it wanted to for energy.B) there was lack of any competition, so Enron was the winner.C) there is a competitive market in energy distribution in the United States.D) the accounting profession needs to review its policies quickly.

Q: Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each otherʹs way and fewer dinners are served. This is an example ofA) diminishing marginal product. B) diminishing marginal utility. C) diminishing marginal workforce. D) diminishing marginal inputs.

Q: The present value of a sum to be received in the future is greaterA) the greater the interest rate.B) the less the time period before receiving the sum. C) the greater the inflation rate.D) the greater the discount rate.

Q: A proprietorship isA) two or more individuals in business together.B) a corporation that is taxed like an individual.C) a business owned by one individual who makes all of the decisions.D) a government-owned franchise.

Q: The real-income effect refers toA) the law of diminishing marginal utility.B) the want-satisfying power of a good or service.C) substitution of less expensive commodities for more expensive commodities.D) the change in purchasing power when the price of a good changes.

Q: Utility refers toA) the usefulness of a good or service.B) the value of a good or service.C) the want-satisfying power of a good or service. D) the degree to which a good or service is needed.

Q: Suppose 1000 units of a good are sold at $10 a unit. If price increases to $15 and total revenue increases to $15,000 and increases by $1000 for every dollar increase in price after that, we know thatA) demand is perfectly elastic.B) the demand curve is vertical.C) the demand curve is downward sloping and the firm is on the inelastic portion of the demand curve.D) the demand curve is a rectangular hyperbola.

Q: There is an externality present only whenA) private costs diverge from social costs.B) private benefits diverge from social benefits.C) private costs or benefits diverge from social costs or benefits. D) private costs equal social costs.

Q: Which of the following is NOT considered a determinant of income differences?A) productivity B) ageC) discrimination D) equity or fairness

Q: Which statement is most TRUE about the impact of unions on wage levels in the Untied States?A) Unions have had no impact on the wage levels of their workers.B) Unions have tended to increase the hourly wage rates of their members relative to nonunion workers by an average of about $2.25.C) Unions have contributed to increased income inequality in the United States by raising corporate profits.D) The union/nonunion wage differential tends to decrease during a recession.

Q: Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. What does the marginal revenue product equal when 27 workers are hired a week?A) $1040 B) $216 C) $16.25 D) $8

Q: Refer to the above table. For each level of employment of labor shownA) marginal product declines.B) marginal product holds constant. C) marginal product rises.D) marginal product falls for all employees beyond the 10th unit of labor.

Q: Regulation that is based upon the cost of providing the good or service is known as A) rate-of-return regulation. B) cost-of-service regulation. C) social regulation. D) deregulation.

Q: Which of the following statements concerning the prisonerʹs dilemma is true?A) The player who moves last will always win.B) Confessing is the dominant strategy for both players. C) Neither player will pick the dominant strategy.D) The player who moves first will always win.

Q: A good that has qualities that are easy for a consumer to assess in advance of a purchase is calledA) a credence good. B) a search good.C) an experience good. D) a persuasive good.

Q: When comparing perfect competition and monopoly, a major assumption made is thatA) the monopolist faces a downward sloping demand curve.B) consumers only care about the price of the good and not whether the seller is a monopoly or not.C) the costs of production are the same under monopoly as under perfect competition. D) the monopolist can make an above normal rate of return.

Q: For a firm facing a downward sloping demand curve, marginal revenueA) is at a minimum at the midpoint of the demand curve. B) is greater at higher prices than at lower prices.C) increases each time prices are lowered. D) falls each time prices are raised.

Q: Using the above figure, the short-run break-even price for the perfectly competitive firm will beA) P1. B) P2. C) P3. D) P4.

Q: In a perfectly competitive market structure any firm can enter or leave the industry without serious impediments. This impliesA) the products sold will be alike.B) firms will move labor and capital in pursuit of profit-making opportunities to whatever business venture gives them the highest return on their investment.C) no one buyer or seller has any influence on price.D) consumers are able to find out about lower prices charged by other firms.

Q: The law of diminishing marginal product shows the relationshipA) between accounting and economic profits.B) between short-run and long-run outputs of a firm.C) between inputs and outputs for a firm in the short run.D) between inputs and outputs for a firm in the long run.

Q: A firm is considering three projects. Each costs $1 million now. Project A will yield $400,000 a year for three years, beginning one year from now. Project B will yield $1.25 million three years from now, and Project C will yield $600,000 for two years, beginning two years from now. If the interest rate is 8 percent, which of these projects should the firm undertake?A) Project A. B) Project B. C) Project C. D) None of these.

Q: Which of the following options is NOT a characteristic of a proprietorship?A) Single ownership B) Unlimited liabilityC) Double taxation D) Easy to form and dissolve

Q: The tendency of people to substitute cheaper commodities for more expensive commodities is theA) law of diminishing marginal utility. B) real-income effect. C) substitution effect. D) price income effect.

Q: Consumers are most satisfied whenA) all of their income has been saved.B) the total level of utility is as high as possible. C) goods are bought ʺon sale.ʺD) they save more than they spend.

Q: If demand is perfectly elastic everywhere along the demand curve, thenA) people must be irrational.B) the demand curve is vertical.C) the demand curve is a rectangular hyperbola.D) the demand curve is horizontal.

Q: Social costs of a good are equal toA) external costs minus private costs.B) private costs minus external costs. C) private costs plus external costs.D) external costs divided by the private costs.

Q: The age-earnings profile for most people indicates A) earnings rise continually until a person retires. B) earnings initially decline and then rise continually until retirement. C) that when you adjust for inflation, earnings are constant throughout the entire workplace experience. D) earnings rise until the age of about 50 and then begin to fall until retirement.

Q: In the United States the differential between union and non -union wagesA) does not exist.B) currently averages about 50-60 percent. C) has been narrowing.D) tends to fall during a recession because union members typically have shorter -term contracts than do nonunion employees.

Q: Labor Input (workers per week)Marginal Physical Product (output per week)Marginal Revenue MR251509.00261408.50271308.00281207.50291107.00Refer to the above table. What does the marginal revenue product equal when 26 workers are hired a week?A) $8.50 B) $26 C) $221 D) $1190

Q: Refer to the above table. Suppose the price of the good sold is $10 and the marginal factor cost of labor is $700, how many units of labor will the firm hire?A) 10 B) 11 C) 12 D) 13

Q: Regulation that is based on allowing prices to reflect only the actual operating cost of production is known asA) average cost regulation. B) marginal cost regulation.C) rate-of-return regulation. D) cost-of-service regulation.

Q: Games can be judged according to the payoffsA) as zero-sum, negative-sum, and positive-sum games. B) as collusive or noncollusive games.C) as competitive or noncompetitive games.D) whether all companies participate or not.

Q: Bonnie has just purchased a crystal vase she saw advertised when she went on line to find her local weather forecast. The internet ad is an example ofA) mass marketing. B) direct marketing.C) indirect marketing. D) interactive marketing.

Q: One problem associated with a monopoly firm is that it A) produces too little output but also charges a low price. B) produces too much output and charges too low a price. C) restricts output and charges a relatively higher price than a purely competitive firm. D) is just as good as a purely competitive firm in terms of output and price.

Q: If a firm sells 20 units of output at $15 per unit and 21 units of output when price is reduced to $14, its marginal revenue from selling the last unit isA) $6. B) $21. C) $294. D) $14.

Q: Using the above figure, the perfectly competitive firm should shut down if the market price is belowA) P1. B) P2. C) P3. D) P4.

Q: In a perfectly competitive market structure both buyers and sellers have equal access to information. This implies A) the products sold will be alike. B) firms will move labor and capital in pursuit of profit-making opportunities to whatever business venture gives them the highest return on their investment. C) no one buyer or seller has any influence on price. D) consumers are able to find out about lower prices charged by other firms.

Q: When total product is decreasing, marginal product isA) positive and increasing. B) positive and decreasing.C) constant. D) negative.

Q: The general form for discounting isA) PV = At* (1 + i)t. B) PV = At/(1 + i)t.C) PV = (1 + i)t/At. D) PV = 1/(1 + it)t.

Q: The most common type of firm in the United States is theA) proprietorship. B) partnership.C) corporation. D) limited partnership.

Q: The substitution effect refers toA) the law of diminishing marginal utility.B) the want-satisfying power of a good or service.C) substitution of less expensive commodities for more expensive commodities.D) the change in purchasing power when the price of a good changes.

Q: Marginal utility is defined asA) the increase in utility divided by the total number of units consumed.B) the total utility divided by the total number of units consumed.C) the change in total utility divided by the change in number of units consumed.D) the number of units consumed divided by the total utility.

Q: If the slope of a demand curve is constant, then we know thatA) elasticity of demand is also elastic everywhere.B) elasticity of demand is constant and elastic. C) elasticity of demand is inelastic everywhere.D) elasticity of demand varies along the demand curve.

Q: You enter a classroom, which is littered with newspapers. This is because A) students are too lazy to clean up. B) maintenance people only clean once a day. C) it is a way to protest against the tuition rates. D) students do not pay for littering.

Q: Which of the following is a reason for economic discrimination to occur? A) differences in access to education B) differences in gender C) differences in the quality of education D) barriers to entry in higher-paying occupations

Q: Which of the following best describes the effects of unions in the United States today?A) The average union worker works more hours but earns a lower annual income than the average nonunion worker.B) The average union worker works fewer hours but earns a higher annual income than the average nonunion worker.C) The average union worker works more hours and earns a higher annual income than the average nonunion worker.D) The average union worker works fewer hours and earns a lower annual income than the average nonunion worker.

Q: A monopolist will hire fewer workers than a perfectly competitive firm becauseA) the marginal product curve decreases as additional units of labor are hired for a monopoly but not for a competitive firm.B) there is a variety of employers in a competitive market and only one in a monopoly.C) marginal revenue is greater than price for a monopoly while marginal revenue is equal to price for a competitive firm.D) to sell an additional unit of the good the competitive firm will keep the price the same while the monopolist must lower it on all units sold.

Q: Refer to the above table. If the price of the good produced is $9, the marginal revenue product of the 13th worker isA) $810 B) $360 C) $6840 D) $630

Q: The type of regulation that attempts to keep prices and the rate of return in an industry at a competitive level is referred to asA) cost-of-service regulation. B) rate-of-return regulation. C) service-opportunity regulation. D) natural regulation.

Q: A game in which players collectively gain is known as aA) zero-sum game. B) positive-sum game. C) negative-sum game. D) cooperative game.

Q: Carol has just purchased a cereal she saw advertised on TV because of the health benefits contained in the ad. The TV ad is an example ofA) mass marketing. B) direct marketing.C) indirect marketing. D) interactive marketing.

Q: A monopoly misallocates resources when it A) restricts output so that the marginal benefit of the last unit sold exceeds the marginal social cost of producing the good. B) makes an above-normal profit. C) sells the same product to different groups of customers at different prices. D) exploits scale economies.

Q: If a firm sells 5 units of output at $10 per unit and 6 units of output when price is reduced to $9, its marginal revenue from selling the sixth unit isA) $9. B) $40. C) $540. D) $4.

Q: Using the above figure, the perfectly competitive firm in the diagram will earn an economic profit if the market price isA) P1. B) P2. C) P3. D) P4.

Q: What does it mean when the products sold by the firms in an industry are homogeneous?A) The product sold by one firm is a perfect substitute of the product sold by another firm in the same industry.B) Firms in the industry can produce the same product with different inputs.C) All firms in the industry are identical in size.D) The product sold by one firm is a perfect complement of the product sold by another firm in the same industry.

Q: Quantity of WorkersTotal ProductAverage Physical ProductMarginal Physical Product00 13 27 312 416 518 618 The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is theA) law of diminishing marginal product. B) streamlining production function.C) consumer equilibrium. D) theory of increasing marginal utility.

Q: If the annual interest rate remains unchanged over the next two years, and the present value of $120 to be received one year from now is $100, what will $100 be worth two years from now?A) $120B) $140C) $144D) Uncertain. We need to know the interest rate.

Q: A proprietorship isA) difficult to form.B) taxed twice-once when it pays business taxes and again when its owner pays personal income taxes.C) not often found in developed economies, in which corporations have become the most common form of business organization.D) risky for its owner, who is personally responsible for the firmʹs debts.

Q: Dave is undecided about whether to eat at a restaurant or to order pizza at home. He then obtains a coupon for 20 percent off at the restaurant and decides to go there to eat. This is an example ofA) someone using criteria other than price to make a consumption decision.B) a lower price leading a consumer to substitute more of the less expensive good for the relatively more expensive good.C) a lower price leading a consumer to buy more of a good because of the income effect. D) a consumer making a decision irrationally.

Q: If two units of a good provide 7 utils and the marginal utility of the third unit of the good is 2 utils, what is the total utility from consuming three units of the good?A) 3 utils B) 7 utils C) 9 utilsD) 10 utils

Q: Within the range of prices around the midpoint on a straight -line demand curve, demand isA) elastic. B) inelastic. C) unit-elastic. D) zero.

Q: Which one of the following is an example of an external cost?A) the cost to attend college B) labor costs to a firmC) emissions from a factory D) a house payment owed by a friend

Q: Unequal pay that is caused by economic discrimination will be due toA) a noneconomic factor.B) differences in the marginal revenue product. C) a monopolistic labor market.D) difference in human capital.

Q: In some settings,A) unionism is associated with increased productivity.B) unions have been effective in promoting general social legislation. C) Both A and B are correct.D) Neither A nor B is correct.

Q: Other things equal, a monopolist will hireA) more workers than a perfectly competitive industry.B) fewer workers than a perfectly competitive industry. C) more workers than a perfectly competitive firm.D) the same number of workers as a perfectly competitive industry would.

Q: Refer to the above table. What does the marginal physical product equal when the amount of labor goes from 12 to 13 units?A) 58.5 B) 70 C) 690 D) 760

Q: Regulation of monopolies that allows prices to reflect only the actual cost of production and no monopoly profits is referred to asA) cost-of-service regulation. B) rate-of-return regulation. C) service-opportunity regulation. D) natural regulation.

Q: A game in which players collectively lose is known as aA) zero-sum game. B) positive-sum game. C) negative-sum game. D) cooperative game.

Q: Stephanie has just placed an order for the latest video after she received a personalized e -mail.The e-mail is an example ofA) mass marketing. B) direct marketing.C) indirect marketing. D) interactive marketing.