Q&A Hero

Q: Usually, price elasticities of supply areA) positive, because higher prices yield larger quantities supplied.B) considered short-run adjustments due to supply constraints. C) ordinarily a negative number based on the law of supply.D) an inverse relationship between price and quantity supplied.

Q: A perfectly elastic demand curve exhibitsA) zero responsiveness to changes in price.B) that quantity demanded will decrease to zero when there is a slight increase in the price level.C) a change in quantity demanded that is proportional to the change in price.D) a change in quantity demanded that is always twenty percent of the change in price.

Q: Why are most endangered species belong to common property?

Q: Costs borne solely by the individuals who incur them areA) private costs. B) social costs.C) internality. D) common property.

Q: With respect to wealth in the United States, we presently find that the richest one percent of Americans own approximately how much of the nationʹs wealth?A) 10 percent B) 40 percent C) 70 percent D) 85 percent

Q: Other things equal, granting unemployment benefits or welfare benefits to striking workersA) reduces the likelihood of a strike since management will be more cooperative.B) reduces the costs of a strike to workers and will increase their willingness to strike.C) reduces the likelihood of a strike since union workers make wages significantly above unemployment benefits or welfare payments.D) increases the willingness of management to permit a strike.

Q: All of the following shift an industryʹs labor supply curve EXCEPT changes inA) market wages offered in other industries.B) the demand for the final product. C) job flexibility.D) working conditions.

Q: Marginal revenue product isA) marginal physical product multiplied by marginal revenue.B) marginal physical product multiplied by average variable cost of the product. C) the price of the product.D) the total revenue from the sale of the product sales.

Q: If regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality of service willA) increase rapidly. B) likely fall.C) remain unchanged. D) none of the above.

Q: Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?A) Both firm A and firm B choose the high price. B) Both firm A and firm B choose the low price.C) Firm A chooses the low price while firm B chooses the high price. D) Firm A chooses the high price while firm B chooses the low price.

Q: In long-run equilibrium in a monopolistically competitive industry, a firm will A) always earn an economic profit. B) produce an output rate at which P = MC. C) produce at a point to the left of the minimum point on its average total cost curve. D) have a perfectly elastic demand curve.

Q: For a firm to be able to engage in price discrimination, it must A) face a downward sloping demand curve. B) produce more than one product. C) have customers of different levels of wealth and age. D) have economies of scale.

Q: A patent provides legal protection for an invention forA) 20 years. B) 9 years. C) 5 years. D) 3 years.

Q: For a perfectly competitive firm, any price below its minimum AVC is a A) market price. B) shutdown price. C) profit maximizing price. D) negative price.

Q: Refer to the above figure. Diseconomies of scale existA) over the entire range of output. B) from output Q2 to Q5. C) up to output Q2. D) after output Q5.

Q: Use the information from the below table to answer following question(s).Input of LaborTotal Product001202503804105512561407150In the above table, the average product for 3 units of labor isA) 30.0. B) 26.7. C) 26.3. D) 25.0.

Q: In an inflationary atmosphere that everyone anticipates will persist, lenders willA) desire a lower nominal interest rate to increase the real rate.B) desire a higher nominal interest rate to protect against the inflation.C) tend to see the real rate of interest increase, particularly if the inflation is unforeseen. D) have the real rate of interest guaranteed by the Federal Reserve Board.

Q: For superstar athletes, A) their entire earnings are economic rent. B) part of their earnings are economic rent. C) none of their earnings are economic rent since rent doesnʹt apply to labor. D) none of their earnings are economic rent since they will do some other work once they are too old to be an athlete.

Q: The state of consumer optimum is reached when the consumerʹsA) total utility/marginal utility ratio for all items is equal. B) total utility/price ratio for all items is equal.C) marginal utility for a product is zero.D) marginal utility/price ratios for all items are equal.

Q: Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?A) The longer is the time period for adjustment, the greater is the price elasticity of supply.B) The longer is the time period for adjustment, the less is the extent to which resources flow into (or out of) an industry through expansion (or contraction) of existing firms.C) The longer is the time period for adjustment, the greater is the extent to which entry or (exit) of firms increases or (decreases) production in an industry.D) The shorter the time period for adjustment, the greater is the price elasticity of supply.

Q: A perfectly inelastic demand curve exhibitsA) zero responsiveness to changes in price.B) zero quantity demanded when there is a slight change in price.C) a change in quantity demanded that is proportional to the change in price.D) a change in quantity demanded that is always twenty percent of the change in price.

Q: ʺThe number of species on earth is decreasing drastically and economic development is the main factor for the problem.ʺ Do you agree or disagree? Why?

Q: Private costs areA) external costs borne by private firms.B) explicit costs rather than implicit costs.C) costs borne by private members of society rather than governmental bodies. D) costs borne solely by the individuals who incur them.

Q: WealthA) is the same as income.B) includes assets such as houses, stocks, and bonds.C) does not include tangible objects. D) is a flow and not a stock.

Q: The purpose of a strike isA) to obtain higher wages for union members only. B) to solve jurisdictional disputes.C) to obtain a closed shop.D) to force management to accept the unionʹs proposed contract terms.

Q: All of the following shift the labor demand curve EXCEPT changes inA) fringe benefits offered to employees. B) the demand for the final product. C) labor productivity. D) prices of related factors.

Q: As more workers are hired, the marginal physical product of labor eventually declines becauseA) less efficient workers are hired as the number of workers increases.B) workers do not work well together when the number of workers increases.C) the amount of capital each worker has to work with declines as the number of workers increases.D) of diseconomies of scale.

Q: The primary purpose of economic regulation of an industry is toA) control the prices charged by the regulated industry.B) increase taxes across the board. C) reduce output.D) control hiring and firing within the industry.

Q: Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?A) Both firm A and firm B choose the low price.B) Both firm A and firm B choose the high price.C) Firm A chooses the low price while firm B chooses the high price.D) Firm A chooses the high price while firm B chooses the low price.

Q: A monopolistically competitive firm differs from a perfectly competitive firm in the long run in that A) the demand curve faced by a monopolistically competitive firm is downward sloping, while the demand curve faced by a perfectly competitive firm is horizontal. B) profits are positive for a monopolistically competitive firm and zero for a perfectly competitive firm. C) profits are zero for a monopolistically competitive firm and positive for a perfectly competitive firm. D) marginal cost equals the market price for a monopolistically competitive firm but not for a perfectly competitive firm.

Q: For price discrimination to exist, all of the following are necessary EXCEPT A) a downward sloping demand curve.B) an identifiable group of buyers with different elasticities of demand. C) an upward sloping marginal cost curve.D) there can be no resale of the product.

Q: Which of the following is not true about a certificate of convenience and public necessity?A) It is a barrier to entry. B) It is a patent.C) It is issued by a government agency. D) It limits competition.

Q: Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $6.00; AVC = $4.00; MC = $3.50; MR = $3.50. The firm shouldA) increase output. B) increase price. C) remain at the same position. D) shut down.

Q: Refer to the above figure. Economies of scale existA) over the entire range of output. B) from output Q2 to Q5.C) up to output Q2. D) after output Q5.

Q: Use the information from the below table to answer following question(s).Input of LaborTotal Product001202503804105512561407150In the above table, the average product for 5 units of labor isA) 20.0. B) 22.5. C) 25.0. D) 15.0.

Q: The real rate of interest is A) the nominal interest rate minus the anticipated rate of inflation. B) the interest rate actually paid explicitly by the borrower. C) the interest rate received by the lender minus the handling charges of the loan. D) the average rate of interest over the last 20 years.

Q: Economic rents are useful becauseA) they increase the income of the owner.B) they make it easy to calculate opportunity cost. C) resources will go to their most efficient use.D) they increase tax revenue.

Q: If the last $5 spent on movies added 30 utils to your total satisfaction and the last $8 spent on books add 64 utils,A) you can increase your satisfaction by buying more books and seeing fewer movies. B) your total satisfaction is 94 utils.C) you can increase your satisfaction by buying fewer books and seeing more movies. D) you can increase your satisfaction by buying only books.

Q: A situation in which there is a reduction in quantity supplied to zero when there is the slightest decrease in price isA) perfectly elastic supply. B) perfectly elastic demand.C) perfectly inelastic supply. D) perfectly inelastic demand.

Q: If a good has an absolute price elasticity of 0, the demand for the good isA) unit elastic. B) inelastic.C) perfectly inelastic. D) elastic.

Q: Today, the earth has of all of the species that have ever lived.A) less than 1 percent B) about 50 percentC) about 99 percent D) 100 percent

Q: Refer to the above figure. It represents supply and demand for The Black Ash Steel Companyʹs output. The firmʹs plant belches large quantities of smelly fumes and black ash into the air. Residents in the surrounding area have higher medical bills as a result. If the firm is forced to pay the full social cost of its production, what will occur?A) Black Ashʹs supply curve will shift from S A to SB.B) Demand for the firmʹs steel will shift to the left.C) The companyʹs supply curve will shift from S B to SA.D) Black Ash will increase its own output to cover the cost increase.

Q: Regarding income distribution and the distribution of wealth, A) wealth is a stock concept and income a flow concept.B) a stock is evaluated at a given moment in time; a flow is evaluated during a period of time. C) income, a flow, can be viewed as a return on wealth.D) All of the above are correct.

Q: A strikebreaker isA) a temporary worker hired by a company to replace a union member who is striking.B) when the President imposes a cooling-off period. C) someone who engages in featherbedding.D) a secondary boycott.

Q: Which of the following will NOT shift the MRP curve for labor? A) a change in the productivity of labor B) a change in the price of the product being sold C) a change in the wage rate in the market D) a change in the demand for the product being produced

Q: We assume that when a firm hires additional workers, the marginal physical product of labor willA) increase because more workers can always get more work done.B) decrease because the new workers are likely to be less able than the previously hired ones. C) decrease because each worker now has less capital and other resources to work with.D) increase because large firms are more efficient.

Q: One goal of rate-of-return regulation is the prevention ofA) free market entry. B) positive economic profits.C) poor quality service. D) environmental degradation.

Q: Refer to the above payoff matrix (in years of sentence) for two people (A and B) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?A) Both A and B confess. B) Both A and B do not confess.C) A confesses while B does not confess. D) A does not confess while B confesses.

Q: Refer to the above figure. Which panels represent long run equilibrium for the perfectly competitive firm and monopolistic competitive firm, respectively?A) Panel C & Panel A. B) Panel C & Panel B.C) Panel B & Panel C. D) Panel C & Panel D.

Q: Monopolies that price discriminate do so becauseA) they are able to do so and no one else can. B) they can increase their profits.C) it keeps them out of trouble with the government. D) it is more efficient.

Q: Some electrical utilities are monopolies because ofA) government restrictions that prevent new firms from entering the market.B) ownership of resources without close substitutes. C) diseconomies of scale.D) their inability to earn profits.

Q: At a perfectly competitive firmʹs short-run break-even price, A) P = ATC.B) TR is more than TC.C) the average cost is below the total revenue line.D) P > AVC, but P < AFC.

Q: The main source of diseconomies of scale isA) dimensional factors associated with many physical relationships.B) specialization of labor.C) limits to the efficient functioning of management.D) constant returns to scale.

Q: LaborOutputAverage Physical ProductMarginal Product110 -2 12 3 15452 5 9Using the above table, the marginal product of the 4th worker isA) 12. B) 13. C) 14. D) 15.

Q: The nominal rate of interest isA) the same as the price level.B) the real rate of interest minus the previous yearʹs change in the price level.C) the interest rate actually paid by the borrower. D) lower than the real rate in a period of inflation.

Q: Rents A) have no useful economic purpose. B) have an allocative function since they help decide to which use a resource will be put. C) have a distributional function since they affect incomes, but have no allocative function since the resource is in fixed supply. D) have an economic purpose only if they are taxed and provide revenue to the government.

Q: The price of a can of soft drink is $1.25 and the marginal utility of the second can consumed is 10 utils. The marginal utility of the third donut is 4 utils. You should only consume the third donut if the price of the donut is less than or equal toA) $0.41. B) $0.625. C) $0.25.D) $0.50.

Q: While the slope of the perfectly inelastic supply curve , the slope of the perfectly elastic supply curve .A) is zero, approaches infinity B) approaches infinity, is zeroC) is zero, is zero D) approaches infinity, approaches infinity

Q: If a good has an absolute price elasticity of 1, the demand for the good isA) unit elastic. B) inelastic.C) perfectly elastic. D) elastic.

Q: Approximately what percentage of the worldʹs extinct species became extinct before humans appeared on earth?A) 1 percent B) 10 percentC) 20 percent D) more than 99 percent

Q: The Black Ash Steel Companyʹs plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ashʹs pollution. If the firm is forced to pay the social costs of its production,A) the amount of steel it produces will increase in order to pay the additional costs. B) the price it charges for its steel will decrease.C) its supply curve will shift to the right.D) it will produce less and charge more for its steel.

Q: Recent income distribution figures in the United States showA) slightly more inequality. B) less inequality.C) greater equity. D) less equity.

Q: The ultimate threat of a union isA) the lockout.B) the Presidentʹs power granted by the Taft-Hartley Act. C) the unity of spirit of the union membership.D) the strike.

Q: When the price of labor increases, the substitution effect will the quantity of labor demanded and the output effect will it.A) increase; increase B) increase; decreaseC) decrease; increase D) decrease; decrease

Q: The marginal physical product of labor is the A) total output divided by the number of labor employed. B) wage that must be paid to labor. C) value of sales divided by additional labor used. D) change in output generated by a unit change in labor.

Q: In the above figure, which of the following statements is FALSE if the firm is operating at output level Q2?A) The output is equivalent to an unregulated monopolist.B) Economic profits are positive.C) The price is lower than at an equivalent firm forced by regulators to charge ATC pricing.D) Average costs would be lowered by expanding output.

Q: Refer to the above payoff matrix (in years of sentence) for two people (Bo and Max) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?A) Both Bo and Max confess.B) Both Bo and Max do not confess.C) Bo confesses while Max does not confess. D) Bo does not confess while Max confesses.

Q: Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?A) A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve.B) In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits.C) Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run.D) In the long run, the perfectly competitive firm will produce at the minimum of the averagetotal cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve.

Q: Price differentiation is a situation in whichA) there are different prices for similar products reflecting differences in the marginal cost of providing the commodities to different groups of buyers.B) there are different prices for the same product that are not due to differences in the marginal cost of providing the commodity to different groups of buyers.C) consumersʹ comparison-shop. D) the demand curve is vertical.

Q: Which of the following is NOT a restriction the government imposes to keep potential entrants out of a market? A) Subsidizing imported goods B) Licensing of exclusive ownership of such a vital resources C) Certificate of convenience D) Compliance with government safety regulations

Q: Accounting profits at a firmʹs break-even point are A) positive. B) negative. C) zero. D) indeterminate since we need to know what demand is.

Q: Which of the following is NOT a reason why a firm may experience economies of scale?A) Productive specialization B) Dimensional factorsC) Improved productive equipment D) Increased levels of management

Q: LaborOutputAverage Physical ProductMarginal Product110 -2 12 3 15452 5 9Using the above table, the marginal product of the 2nd worker isA) 12. B) 14. C) 15. D) 13.

Q: The real rate of interest will approximately be equal to A) the nominal interest rate plus the expected rate of inflation. B) the stated rate of interest in a high -inflation economy. C) the nominal interest rate minus the expected rate of change in the price level. D) the stated rate minus the opportunity cost of capital.

Q: The concept of economic rent can be applied toA) land only.B) land and natural resources only.C) land, natural resources, and paintings by dead masters only. D) any resource that cannot be replicated exactly.

Q: Based on the material presented in the chapter, can we conclude that people will consume goods until the marginal utility of each good is zero?A) Yes, because at that point total utility is maximum.B) Yes, because at that point marginal utility is minimum.C) No, because consumption is determined by total utility.D) No, because consumption is determined by the marginal utility/price ratio.

Q: The price elasticity of supply is higher whenA) the number of producers in the market increases over time. B) the product in question is a complementary good.C) the number of buyers in the market increases.D) producers have less time to adjust to price changes.

Q: If a good has an absolute price elasticity of 2, the demand for the good isA) unit elastic. B) inelastic.C) perfectly elastic. D) elastic.

Q: The Endangered Species Act hasA) caused a loss of economic activities on some private land. B) saved all endangered species without affecting anyone.C) further reduced the number of endangered species.D) had no impact on either the number of endangered species or other economic activities.

Q: The Black Ash Steel Companyʹs plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ashʹs pollution. As long as Black Ash is allowed to emit pollution and ignore any externalities, the firm will A) overproduce. B) under produce. C) charge too high a price for its output. D) be absorbing the full value of its social costs.