Q&A Hero

Q: A union can achieve higher wages without accepting lower levels of employment of members by A) striking. B) increasing the productivity of its members. C) increasing the amounts of imports. D) increasing the difficulty of its apprenticeship program.

Q: Some companies are having their technical support calls answered by people located in India.This is an example ofA) a factor that shifts the supply of labor curve in the U.S.B) insourcing. C) outsourcing.D) a change in the demand for the final product that labor produces.

Q: The market demand curve for laborA) slopes downward. B) slopes upward.C) is vertical at the existing supply of labor. D) is horizontal at the going wage rate.

Q: Refer to the above figure. What are the price and quantity if this monopolist is required to use average cost pricing?A) P5, Q1 B) P3, Q3 C) P2, Q1 D) P1, Q4

Q: Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?A) High price.B) Low price.C) There is no best strategy.D) Not enough information is given to determine the best strategy.

Q: It has been argued that in the long run monopolistic competition is inefficient because A) there are too many firms, each with excess capacity, producing too little output. B) there are few many firms, each with excess capacity, producing too much output. C) minimum average total costs are achieved but price exceeds marginal cost.D) minimum average total costs are not achieved and marginal cost exceeds price.

Q: Which of the following is LEAST likely to be able to regularly engage in price discrimination?A) a farmerB) an airlineC) a universityD) a producer of copyrighted computer software

Q: Barriers to entry might include all of the following EXCEPTA) patents and copyrights. B) ownership of essential resources.C) government franchise. D) positive economic profits.

Q: A firm will continue to produce in the short run even though economic profits are negative as long asA) the amount of the loss is no greater than the amount of fixed cost. B) MC = MR.C) it earned positive economic profits last year.D) it has fixed obligations to pay.

Q: The lowest rate of output per unit of time at which long-run average costs for a particular firm are at a minimum isA) economies of scale. B) diseconomies of scale.C) constant returns of scale. D) minimum efficient scale.

Q: Quantity of LaborTotal ProductAverage ProductMarginal Product1 320 2 335 3 3384 320Refer to the above table. What does total product equal when 2 units of labor are used?A) 320 B) 335 C) 350 D) 670

Q: If the present value of $110 to be received one year from now is $100, what will $100 be worth two years from now? A) $110 B) $121 C) $100 D) Canʹt say since we donʹt know what the interest rate is

Q: When a resource has a perfectly inelastic supply curve,A) the amount of economic rent for this resource is determined by its supply.B) the amount of economic rent for this resource is determined by demand for the resource.C) the amount of economic rent for this resource is determined by the government. D) there is no economic rent being earned by this resource.

Q: Suppose that an individual consumes only two goods. What will happen to the individual if her last dollar spent on one good yields more marginal utility than that from another good?

Q: Utility analysis helps economists understandA) how people make decisions about what they buy and how much.B) how to eliminate opportunity costs. C) how to eliminate scarcity.D) none of the above.

Q: Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers shouldA) increase the price of the newsletters. B) reduce the price of the newsletters.C) sell the newsletters on the inelastic portion of its demand curve.D) keep the price the same.

Q: Suppose there are two identical factories on a river. Both require clean water for their production processes. The upstream firm gets clean water from the river and dumps dirty water into the river. The downstream firm must clean the water it gets from the river before it can use the water and later it dumps dirty water into the river. In this situationA) the private costs of the two firms are the same since both dump dirty water into the river. B) the upstream factoryʹs private costs are lower than its social costs since it passes the costs of the dirty water on to the downstream firm. For the downstream firms, private costs equal social costs.C) the private costs of the downstream firm are greater than the private costs of the upstream firm and the social costs are less than the private costs for both firms.D) the private costs of the upstream firm are less than its social costs while the social costs of the downstream firm are less than its private costs.

Q: Much of a personʹs increased productivity can be linked to A) on-the-job training. B) the prevalent marginal tax rate. C) the price elasticity of demand for the product. D) the income elasticity of demand for the product.

Q: Refer to the above figure. Suppose there are L4 workers in the union. If the union wants to set a wage rate of W3, it mustA) determine which of its members will earn W3 and which will earn W1.B) accept that L4 - L2 members will not be able to find work in the industry.C) accept that L3 - L2 workers will have to get a lower wage equal to W2 and L4 - L3 workers will have to get a wage of W1.D) determine the most efficient way to get the firms to accept the wage and hire all L4 workers.

Q: Outsourcing isA) only beneficial to a few select countries.B) another way for residents of different nations to conduct trade with one another.C) not beneficial to any country.D) not beneficial to the consumers who purchase outsourced goods.

Q: Which of the following statements about a perfectly competitive market are true?I. The perfectly competitive industry faces an upward sloping labor supply curve.II. The individual firm in a perfectly competitive industry faces a perfectly elastic labor supply curve.A) I only B) II only C) Both I and II D) Neither I nor II

Q: Refer to the above figure. Regulators cannot force natural monopolies to operate in the long run at a loss. Therefore, they usually require the firms to charge a price equal toA) marginal cost, which is P1. B) marginal cost, which is P2. C) average cost, which is P3. D) average cost, which is P4.

Q: Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a low price?A) High price.B) Low price.C) There is no best strategy.D) Not enough information is given to determine the best strategy.

Q: In the long run, both monopolistically competitive and perfectly competitive firms attainA) lowest cost production. B) positive economic profits. C) zero economic profits. D) productive efficiency.

Q: Senior citizens can buy movie tickets at a lower price than the general public. This is an example ofA) age discrimination. B) demand discrimination. C) price discrimination. D) price differentiation.

Q: A barrier to entryA) makes it illegal for firms to enter the industry.B) can be thought of as unrelated to monopoly. C) slows or even prevents entry into a market. D) usually takes the form of a cartel.

Q: Below the short-run shutdown price, the firm A) is earning positive economic profits. B) is earning negative economic profits. C) is making a normal rate of return on its capital investment. D) may be earning a positive or negative economic profits depending upon costs.

Q: Minimum efficient scale A) is the point at which economies of scale begin for a particular firm. B) is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm. C) applies only to firms with U-shaped long-run average cost curves. D) is the point at which diseconomies of scale begin for a particular firm.

Q: The production function illustrates the amount of total physical product that can be produced with a given set ofA) inputs. B) outputs.C) marginal product. D) marginal input.

Q: The present value of $110 to be received one year from nowA) is $110. B) is $100.C) is $121. D) depends on the rate of discount.

Q: A payment for a resource above the opportunity cost of the resource isA) economic rent. B) social rent. C) nominal rent. D) real rent.

Q: Explain how a consumer maximizes utility.

Q: Suppose that Homer derives 45 utils of total utility from eating 4 donuts and 55 utils of total utility from eating 5 donuts. What is Homerʹs marginal utility from eating the 5th donut?A) 10 B) 45 C) 55 D) 100

Q: If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket prices willA) increase total revenue. B) decrease total revenue.C) not change the elasticity of demand. D) not change total revenue.

Q: An example of a situation in which the social costs are greater than the private costs would beA) a new restaurant takes business away from an established restaurant.B) hand-held calculators putting slide rule manufacturers out of business.C) when a member of a rock bandʹs ability to hear deteriorates from performing in so many loud concerts.D) a physician who cannot examine patients with a stethoscope in an examination room adjacent to an airport.

Q: Which of the following is NOT considered to be a factor in the determination of a personʹs marginal productivity?A) Innate abilities such as high intelligenceB) Investment in human capital such as educationC) On-the-job trainingD) The elasticity of supply of labor

Q: Refer the above figure. Suppose the union sets the wage rate that will maximize the total income for the members who work. The total wages will beA) W1iL4O. B) W2aL3O. C) W3bL2O. D) W3bhW1.

Q: Outsourcing isA) one of the factors that shifts the supply of labor curve.B) when a firm employs labor outside the country in which the firm is located.C) when the change in the price of a complementary input causes the demand for labor curve to shift in the opposite direction.D) the cost of using an additional unit of an input.

Q: A profit-maximizing firm in a competitive market will continue to hire more workers whenA) the marginal factor cost exceeds the marginal revenue product of the additional workers.B) the marginal factor cost equals the marginal revenue product of the additional workers. C) the marginal factor cost is less than the marginal revenue product of the additional workers.D) the marginal factor cost is less than zero.

Q: Refer to the above figure. An unregulated natural monopolistʹs profits will beA) profits equal to Q1 times distance a-c. B) losses equal to Q4 times distance f-g. C) losses equal to Q3 times distance d-e. D) profits equal to Q1 times distance a-b.

Q: Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a high price?A) High priceB) Low priceC) There is no best strategy.D) Not enough information is given to determine the best strategy.

Q: In a long-run monopolistically competitive equilibrium, A) P = ATC, and ATC is not at its minimum value.B) P = ATC, and ATC is at its minimum value. C) P > ATC, and ATC is at its minimum value.D) P > ATC, and ATC is not at its minimum value.

Q: Which of the following is NOT a precondition for price discrimination?A) The product cannot be resold to another customer.B) The price elasticities of demand are different for each group of consumers. C) The product is a durable good.D) The seller must have some market power.

Q: Suppose that a drug for treating cancer is cleared by the Food and Drug Administration and that the company is successful in obtaining a patent for its product. Which of the following is then true?A) The patent holder now faces barriers to entry.B) The method of producing the product would not be considered intellectual property. C) The patent holder has a monopoly.D) The drug would have many close substitutes.

Q: If price is above average total costs, the firm A) is earning positive profits. B) is earning negative profits. C) is making a normal rate of return on its capital investment. D) may be earning a positive or negative profit depending upon costs.

Q: Refer to the above figure. Minimum efficient scale is at output rateA) Q1. B) Q2. C) Q3. D) Q5.

Q: Quantity of WorkersTotal ProductAverage Physical ProductMarginal Physical Product00 13 27 312 416 518 618 In the above table, the average physical product for 5 workers and the marginal physical product of the 5th worker isA) 3.6; 2. B) 0.72; 1.C) 2; 0.6. D) 16; 2.

Q: Present value isA) the value of a future amount expressed in todayʹs dollars.B) the value of a dollar received a year from now, expressed in terms of its future value. C) the inverse of the interest rate.D) the nominal value instead of the real value of something.

Q: The concept of economic rent is associated with the British economist David Ricardo (1772-1823). Ricardo analyzed economic rent for land. Which of the following is FALSE with respect to determining land rent?A) The supply curve for land is vertical (perfectly inelastic).B) Rent is payment for a resource above its opportunity cost. C) Payment for a resource below its opportunity cost is rent. D) Ricardo assumed the quantity of land in a country is fixed.

Q: What is consumer optimum according to utility theory?

Q: The amount of pleasure or satisfaction derived from consumption of a good is calledA) elasticity. B) utility.C) consumer surplus. D) demand.

Q: If the market price of a product falls and as a result total revenue of firms falls, we can conclude thatA) demand is elastic in this price range.B) the productʹs price is above the midpoint of its demand curve.C) demand is inelastic in this price range. D) the demand curve is horizontal.

Q: If the social costs of driving an automobile are greater than the private costs of driving an automobile, thenA) the external costs of auto driving exceed the social costs of auto driving. B) the external costs of auto driving exceed the internal costs.C) the price of automobile driving is too high.D) either people drive their autos too much or more funds should be spent on reducing air pollution.

Q: Which of the following does NOT affect a workerʹs marginal productivity?A) Education B) TrainingC) Talent D) Inheritance of money

Q: Refer the above figure. An increase in labor productivity is likely to stimulate and shift the labor demand curve toA) the right and hence increase union wages per year. B) to the left and hence increase union wages per year. C) the right and hence lower union wages per year.D) None of the above is likely to happen.

Q: A firmʹs employment of labor outside the country in which the firm is locatedA) is outsourcing.B) shifts the supply of labor in the original country. C) is the marginal revenue product.D) shifts the supply of labor in the other country.

Q: When MFC > MRP, a firm in a competitive market willA) stop hiring. B) hire more workers.C) earn additional profits. D) layoff workers.

Q: Refer to the above figure. Suppose the government requires the natural monopolist to charge the efficient price. Then profits for the firm will beA) zero. B) losses equal to Q4 times distance f-g. C) losses equal to Q3 times distance d-e. D) profits equal to Q1 times distance a-b.

Q: Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome with cooperation?A) Both confess.B) Both donʹt confess.C) Bob confesses while Harry does not confess. D) Harry confesses while Bo does not confess.

Q: In the long run, equilibrium positions that arise in both monopolistically competitive and perfectly competitive markets areA) MR = MC and P = MC. B) P = ATC and P = MC. C) MR = MC and P = ATC. D) MR = MC = P.

Q: A monopolist will maximize its profits by charging a higher price for customers with a price elasticity ofA) 0.1. B) 1. C) 1.5. D) 10.

Q: All of the following are barriers to entry in an industry EXCEPTA) a patent. B) governmental restrictions. C) low marginal tax rates. D) economies of scale.

Q: At the short-run break-even price, the firm A) is earning positive economic profits. B) is earning negative economic profits. C) is making a normal rate of return on its capital investment. D) may be earning a positive or negative profit economic depending upon costs.

Q: If the long-run average cost curve continuously slopes upward as output rises, minimum efficient scale would beA) zero.B) at the midpoint of the long-run average cost curve.C) at the rate of output associated with the smallest sized plant the firm can build.D) nonexistent.

Q: Quantity of WorkersTotal ProductAverage Physical ProductMarginal Physical Product00 13 27 312 416 518 618 In the above table, the average physical product of 2 workers and the marginal physical product of the 2nd worker isA) 2; 2. B) 4; 1. C) 3.5; 3.5. D) 3.5; 4.

Q: When the rate of interest is 10 percent, the present value of $100 payable in two years is approximatelyA) $65. B) $83. C) $100. D) $117.

Q: A payment to an owner of a resource in excess of its opportunity cost is know asA) real wages. B) economic rent.C) financial interest. D) accounting profits.

Q: Quantity of Good X/WkMarginal UtilityQuantity of Good Y/WkMarginal Utility11200117002100021400380031100460048005400550061006200Refer to the above table. If the price of Good X is $1, the price of Good Y is $2, and the consumer has $13, the rational consumer will purchaseA) 3 units of Good X and 4 units of Good Y. B) 1 units of Good X and 1 units of Good Y. C) 6 units of Good X and 0 units of Good Y. D) 5 units of Good X and 4 units of Good Y.

Q: In economics, another term for satisfaction isA) income elasticity. B) price elasticity.C) utility. D) marginal productivity.

Q: If demand for a good is perfectly inelastic, thenA) a price increase would cause a fall in quantity demanded.B) a price increase would cause no change in quantity demanded.C) a price increase would cause an increase in quantity demanded.D) a price increase would cause a fall in total revenue.

Q: When social costs of an activity exceed private costsA) a market failure exists.B) there is a tendency for resources to be under-utilized. C) this means that resources are being efficiently used.D) the actual price is above the efficient price.

Q: The learning curve suggests that an individual willA) receive the same income throughout a career.B) gain experience and increase productivity over time. C) be subject to frequent spells of unemployment.D) have an income that falls over time.

Q: Refer to the above figure. Suppose there are L4 workers in the union, and the union wants all of its workers to have a job. It will set the wage rate atA) W1. B) W2. C) W3. D) W4.

Q: When Canadian firms outsource accounting services to the United States, in markets for the labor of accountants,A) equilibrium employment and the market clearing wage rate will both increase in Canada, but equilibrium employment and the market clearing wage rate will both decrease in the United States.B) equilibrium employment and the market clearing wage rate will both decrease in Canada, but equilibrium employment and the market clearing wage rate will both increase in the United States.C) equilibrium employment and the market clearing wage rate will both increase in Canada and in the United States.D) equilibrium employment and the market clearing wage rate will both increase in Canada and in the United States.

Q: When MFC < MRP, a firm in a competitive market willA) stop hiring. B) hire more workers.C) earn fewer profits. D) layoff workers.

Q: Refer to the above figure. If the government uses rate-of-return regulation for the natural monopolist, the firm will charge priceA) P5 and sell Q1 units. B) P2 and sell Q1 units.C) P3 and sell Q3 units. D) P1 and sell Q4 units.

Q: Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome of the dominant strategy without cooperation?A) Both confess.B) Both donʹt confess.C) Bob confesses while Harry does not confess.D) Harry confesses while Bo does not confess.

Q: In the long run, a monopolistic competitor will produce to the point at whichA) average total costs are at the minimum of possible ATC.B) average total costs are higher than the minimum of possible ATC.C) resources are used at the lowest possible cost. D) at the lowest possible price.

Q: A monopolyʹs goal using price discrimination is to increaseA) total revenue. B) marginal revenue.C) total profit. D) the per unit profit.

Q: Which of the following would most likely be classified as a natural monopoly?A) A city water district B) MicrosoftC) Disneyland D) Exxon-Mobil