Q&A Hero

Q: A price-discriminating monopolist will equateA) price and marginal cost in each market.B) price and marginal revenue in each market.C) marginal revenue and marginal cost in each market.D) average revenue and marginal revenue in each market.

Q: Which of the following can be a barrier to entry, closing a market to new firms? A) An elastic industry demand curve B) Control of a vital resource by one producer C) Diseconomies of scale D) Ease of obtaining capital financing

Q: ʺBy producing at an output rate at which marginal revenue equals marginal cost, a firm is definitely making positive economic profits.ʺ Do you agree or disagree? Why?

Q: In the above figure, the long -run cost curve between points A and B illustratesA) diseconomies of scale. B) diminishing marginal product.C) constant returns to scale. D) economies of scale.

Q: Which of the following activities is not included in the production process?A) Determining the value of the goods B) Making the goodsC) Packaging the goods D) Transporting the goods

Q: Corrina was working as a waitress in an Italian restaurant making an annual income of $25,000 per year when she decided to start up her own catering business. Corrina used $10,000 of her savings that was earning 5 percent annual interest to establish her business. After the first year she made an accounting profit of $20,000. Her economic profit wasA) -$5,550. B) -$5,000.C) $20,000. D) $25,000.

Q: In analyzing land rent, David Ricardo constructed a model based onA) perfectly elastic demand for land. B) a perfectly elastic supply of land.C) land being available in infinite quantities. D) the supply of land being perfectly inelastic.

Q: John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $1. The price of Good B is $10. If John wants to maximize his utility he shouldA) continue to purchase the same amount of Good A and Good B.B) increase the consumption of Good A and decrease the consumption of Good B. C) decrease the consumption of Good A and increase the consumption of Good B. D) decrease the consumption of Good A and decrease the consumption of Good B.

Q: If a 1 percent increase in price causes a 2 percent increase in quantity supplied, then supply isA) elastic. B) inelastic. C) unit elastic. D) infinite.

Q: When demand is elastic,A) quantity demanded is very responsive to a change in price.B) quantity demanded is not very responsive to a change in price.C) the proportional change in quantity demanded is equal to the proportional change in price.D) producers react quickly to price changes.

Q: Which of the following best describes the impact of the Emissions Trading Scheme in the European Union between 2005 and the late 2000s?A) Overall greenhouse gas emissions increased.B) Overall greenhouse gas emissions decreased.C) Overall greenhouse gas emissions were totally eliminated.D) Overall greenhouse gas emissions were constant.

Q: There is ʺtoo muchʺ steel production if the A) social costs of steel production are significantly lower than the private costs. B) social benefits of steel production are declining. C) social costs of steel production are significantly higher than the private costs. D) social costs of steel production are declining.

Q: In the above figure, the curve that represents the second most income equality isA) a. B) b. C) c. D) d.

Q: What was the overall trend of U.S. union membership beginning the 1960s? What was the main reason behind that trend?

Q: Which of the following statements is true about the market and individual firmʹs supply curve for labor?A) The market supply curve is perfectly elastic and the individual firmʹs supply curve is perfectly inelastic.B) The market supply curve is perfectly inelastic and the individual firmʹs supply curve is perfectly elastic.C) The market supply curve is more elastic than the firmʹs supply curve. D) The market supply curve is more inelastic than the firmʹs supply curve.

Q: The key issue in determining the relevant product market isA) the degree of interchangeability between products.B) the specific geographic area in which competing products overlap.C) the production processes used to produce the goods. D) the market share test.

Q: An agency that regulates product markets is theA) Equal Employment Opportunity Commission. B) Environmental Protection Agency.C) Federal Trade Commission.D) Occupational Safety and Health Administration.

Q: The merger of two pizza restaurant chains would be an example ofA) a horizontal merger. B) a vertical merger.C) a conglomerate merger. D) an independent merger.

Q: A firm in a monopolistically competitive market determines the profit -maximizing output at whichA) MR = P. B) MR = ATC. C) MR = AVC. D) MR = MC.

Q: Price discrimination refers toA) selling a product at different prices according to the differences in marginal cost of providing it to different consumers.B) selling a product at different prices, with the price difference being unrelated to differences in marginal cost.C) charging the same prices to all consumers but selling them different quantities.D) a deliberate effort on the part of a monopoly producer to confuse consumers.

Q: A monopolist can earn economic profits in the long run becauseA) a monopoly is by definition large, and this gives it the ability to make large profits. B) a monopoly makes the good or service better than anyone else.C) barriers to entry prevent new firms from entering the industry.D) monopolies can legally force people to buy their products and to pay more for them than they are worth.

Q: Can a firm make losses by producing the rate of output at which marginal revenue equals marginal cost? Why?

Q: Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm isA) exploiting the economies of scale available to it. B) facing constant returns to scale.C) facing diseconomies of scale.D) not using the available technology efficiently.

Q: The relationship Q = f(K, L) is an example of aA) cost function. B) production function.C) demand equation. D) profit equation.

Q: The greatest advantage of a corporation is A) ease of setting up the business. B) the double taxation of dividends. C) separation of ownership and control of the business. D) limited liability.

Q: Refer to the above figure. What can we say about economic rent?A) Economic rent equals the area IJK0. B) Economic rent equals the area HJI.C) Economic rent equals the area HJK0.D) There is no economic rent represented in the figure.

Q: John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $4. The price of Good B is $2. If John wants to maximize his utility he shouldA) continue to purchase the same amount of Good A and Good B.B) increase the consumption of Good A and decrease the consumption of Good B. C) decrease the consumption of Good A and increase the consumption of Good B. D) decrease the consumption of Good A and decrease the consumption of Good B

Q: If the supply curve is vertical, then supply isA) relatively elastic. B) perfectly elastic.C) unit elastic. D) perfectly inelastic.

Q: When demand is elastic,A) a proportionately small change in price leads to a proportionately large change in quantity supplied.B) a proportionately small change in price leads to a proportionately small change in quantity supplied.C) a proportionately small change in price leads to a proportionately large change in quantity demanded.D) a proportionately small change in price leads to a proportionately small change in quantity demanded.

Q: The Emission Trading Scheme of the European UnionA) created a market for pollutants.B) sets a cap on the amount of pollutants in each country. C) allowed firms to benefit from emitting pollutants.D) sets the amount of per-unit tax on each pollutant.

Q: The total social cost of production is equal toA) external cost minus internal cost. B) internal cost minus external cost.C) external cost plus internal cost. D) internal cost plus opportunity cost.

Q: In the above figure, the curve that represents the most income equality isA) a. B) b. C) c. D) d.

Q: Distinguish between a closed shop and a union shop. Are either or both shops legal? Explain.

Q: The wage rate found by the intersection of the market demand and supply curves for labor then determines theA) firmʹs demand curve for labor. B) firmʹs supply curve for labor. C) laborʹs supply curve of labor. D) laborʹs demand curve for jobs.

Q: The primary measure of monopoly power used by the government is theA) profitability of the leading firms in an industry.B) percentage of a market controlled by the leading firms in the industry. C) gap between price and marginal cost.D) gap between price and average total cost.

Q: Which of the following is concerned with social regulation?A) Federal Reserve Board B) Sherman CommissionC) Food and Drug Administration D) Board of Education

Q: Suppose an industry is composed of 10 firms. Each firmʹs share of total sales in the industry is 10 percent. If two of the firms merge, then the four-firm concentration ratio in the industry isA) 40 percent. B) 45 percent.C) 50 percent. D) unable to determine.

Q: For a monopolistically competitive firm, A) price equals marginal revenue at all levels of output. B) price is less than marginal revenue at all levels of output. C) price is greater than marginal revenue at all levels of output except for the first unit. D) the demand curve is perfectly inelastic and marginal revenue is zero.

Q: Using a graph, show the profits of a monopoly. Suppose fixed costs increased enough to make the firm earn an economic loss. Show such a situation. Would the monopolist earn economic losses in the long run? Why or why not?

Q: A firm typically achieves its position as a monopolist as a result ofA) a small market and a constant average cost.B) a downward sloping demand for the product. C) barriers to entry.D) the absence of long-run profits in an industry.

Q: In principle, how do we determine a perfectly competitive firmʹs profit-maximizing output and maximum profits given information about the market clearing price, and about the marginal cost and average total cost curves of the firm? Explain in words.

Q: If a firm gets so large that management of employees and other resources becomes a costly problem, it will be experiencingA) diseconomies of scale. B) diminishing marginal product. C) constant returns to scale. D) economies of scale.

Q: Any activity that results in the conversion of resources into products that can be used in consumption isA) planning. B) investment. C) production. D) discounting.

Q: All of the following are advantages of a corporation EXCEPT A) double taxation.B) limited liability.C) ability to raise large sums of financial capital. D) unlimited life.

Q: Ricardoʹs assumption for economic rents for land was based onA) the supply of land being a fixed quantity. B) a shortage of land.C) a surplus of land.D) total government control of land.

Q: John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $4. The price of Good B is $1. If John wants to maximize his utility he shouldA) continue to purchase the same amount of Good A and Good B.B) increase the consumption of Good A and decrease the consumption of Good B. C) decrease the consumption of Good A and increase the consumption of Good B. D) decrease the consumption of Good A and decrease the consumption of Good B

Q: A vertical supply curve may be described as beingA) relatively elastic. B) perfectly inelastic.C) relatively inelastic. D) perfectly elastic.

Q: A demand relationship in which a given percentage change in price will result in a less than proportionate percentage change in quantity demanded isA) elastic. B) unit-elastic.C) inelastic. D) consistent with zero elasticity.

Q: Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases emissionA) to as much as 20 percent below the levels of the 1990s through 2020. B) to as much as 10 percent below the levels of the 1990s through 2010. C) to as much as 100 percent below the levels of the 1990s through 2007. D) to as much as 50 percent below the levels of the 1990s through 2100.

Q: Social costs areA) costs borne by society whenever a resource-using action takes place. B) costs incurred by government and borne by all taxpayers.C) costs incurred in governmental welfare programs.D) external costs minus internal costs.

Q: In the above figure, the curve that represents the most income inequality isA) a. B) b. C) c. D) d.

Q: Discuss the significant laws passed since the Great Depression that affect labor -management relations.

Q: The equilibrium wage rate in an industry is found byA) the intersection of the market demand curve for labor and the marginal revenue product curve of labor.B) the intersection of the firmʹs demand curve for labor and the firmʹs supply curve of labor.C) the intersection of the market demand curve for labor and the market supply curve of labor.D) negotiations between the union leadership and the managers of the firms.

Q: The primary measure of monopoly power isA) the market share test. B) the Sherman test.C) creative response. D) the capture hypothesis.

Q: The federal regulatory agency whose mission is to regulate workplace health and safety is theA) AFL-CIO. B) FTC. C) OSHA. D) SEC.

Q: Suppose an industry is composed of 10 firms. Each firmʹs share of total sales in the industry is 10 percent. If two of the firms merge, then the four-firm concentration ratio in the industry willA) remain unchanged.B) decrease as there are fewer firms in the industry.C) increase.D) depend on the market condition faced by the industry.

Q: OutputPrice per Book ($)Marginal Cost08.00017.001.0026.002.0035.003.0044.004.00The above table depicts prices, quantities, and marginal costs faced by the campus bookstore. At the profit-maximizing level of output, what is the profit earned by the store?A) $15 B) $6 C) $8 D) $0

Q: ʺAll monopolies operate with positive economic profits.ʺ Do you agree or disagree? Why?

Q: If there are no barriers to entry into an industry, A) short-run economic profits must be zero. B) long-run economic profits must be zero.C) both short-run and long-run economic profits must be zero. D) short-run and long-run profits must still be positive.

Q: Suppose a perfectly competitive ukulele factory can produce 35 ukuleles at an output at which marginal cost equals marginal revenue. The price per ukulele is $1300 and the average total cost is $1500. What is the profit or loss that this furniture factory is earning?A) $700.00 B) -$7,000.00 C) -$1,050.00 D) -$450.00

Q: Due to extremely large fixed costs, an electricity generating plant probably experiences which of the following returns to size?A) diseconomies of scale B) diminishing marginal productC) constant returns to scale D) economies of scale

Q: ProductionA) is a process by which resources are produced.B) is a process by which resources are transferred into goods and services.C) only applies to manufacturing of goods.D) is carried on by corporations, but not by sole proprietorships.

Q: When a business is considered by law to be a legal entity, it is known as aA) partnership. B) conglomerate.C) corporation. D) proprietorship.

Q: Pure economic rent is a payment to a resource thatA) has a high opportunity cost. B) has a perfectly inelastic supply.C) has a negative opportunity cost. D) has a perfectly elastic demand.

Q: The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goodsA) is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.B) is an optimum since the entire income is spent and total utility is maximized.C) is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.D) is not an optimum because the consumer has not spent all of his money.

Q: If the quantity supplied stays the same no matter what the price is, then supply isA) perfectly inelastic. B) perfectly elastic.C) unit elastic. D) undefined.

Q: A demand relationship in which the quantity demanded changes exactly in proportion to the change in price isA) elastic. B) unit-elastic.C) inelastic. D) consistent with zero elasticity.

Q: The Kyoto Protocol was signed by participating nations inA) 1872. B) 1972. C) 1997. D) 2007.

Q: Society must pay the full opportunity cost of any activityA) that uses scarce resources. B) that causes costs to rise.C) that increases revenues. D) none of the above.

Q: Each of the curves plotted in the graph shown in the above figure is known as aA) Laffer curve. B) Phillips curve. C) Keynesian curve. D) Lorenz curve.

Q: Distinguish between craft unions and industrial unions.

Q: The demand for computers increases. As a result,A) the quantity demanded of workers increases, the wage rate rises, and the supply of labor increases.B) the demand for workers increases, hiring increases, but wages stay the same since each firm faces a horizontal supply curve of labor.C) the wage rate increases in the industry and the quantity demanded of workers falls.D) the wage rate increases in the industry and the quantity supplied of workers increases.

Q: The percentage of a market that a particular firm supplies isA) asymmetric information. B) market share.C) bundling. D) the capture hypothesis.

Q: Regulation imposed by such organizations as the Food and Drug Administration or the Environmental Protection Agency seeking to protect the welfare of people in our nation is referred to asA) moral regulation. B) natural regulation.C) rate-of-return regulation. D) social regulation.

Q: Economies of scaleA) do not arise in oligopolistic industries.B) can exist but are rare in oligopolistic industries.C) can exist but fail to create barriers to entry in oligopolistic industries.D) are commonplace and often a barrier to entry in oligopolistic industries.

Q: OutputPrice per Book ($)Marginal Cost08.00017.001.0026.002.0035.003.0044.004.00The above table depicts prices, quantities, and marginal costs faced by the campus bookstore.Based on marginal analysis, what is the profit -maximizing level of output for the bookstore?A) 1 book B) 2 books C) 3 books D) 4 books

Q: Use the above figure. Maximized economic profits are represented by rectangleA) ʺA.ʺ B) ʺB.ʺ C) ʺC.ʺ D) ʺAʺ + ʺB.ʺ

Q: If government regulations significantly increase the cost of operating within a particular market, one result is thatA) new firms are discouraged from entering the market. B) barriers to entry are nullified.C) a perfectly competitive market environment is encouraged.D) new firms are encouraged to enter the market.

Q: Suppose a perfectly competitive asparagus farm can produce six containers of asparagus at an output at which marginal cost equals marginal revenue. The price per container of asparagus is $100 and the average total cost is $75. What is the profit or loss that this asparagus farm is earning?A) $450.00 B) $600.00 C) $150.00 D) -$450.00

Q: Which of the following is NOT one of the reasons a firm might be expected to experience economies of scale?A) specialization B) the dimensional factorC) improved productive equipment D) depreciation