QUESTION 1

1. An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

oligopolistic.

perfectly competitive.

monopolistically competitive.

monopolistic.

QUESTION 2

1. An industry with only two firms is generally called:

a duopoly.

a monopoly.

monopolistic competition.

perfect competition.

QUESTION 3

1. A firm has hired the profit-maximizing number of workers when the wage is:

greater than the average product of the last worker hired

.equal to the value of the marginal product of labor of the last worker hired

.less than the price of the product.

equal to the average product of the last worker hired.

QUESTION 4

1. A firm that faces a downward-sloping demand curve is a:

quantity taker.

price setter.

quantity minimizer.

price taker.

QUESTION 5

1. A cartel is an example of:

perfect competition.

price extortion.

overt collusion.

price leadership.

QUESTION 6

1. A good that is nonexcludable but rival in consumption is a _____ good.

private

public

common resource

normal

QUESTION 7

1. A fair insurance policy is one whose premium:

is higher as the probability of a claim decreases.

is zero.

allows the insurance company to profit.

equals the expected value of the claims.

QUESTION 8

1. A firm that has economies of scale:

has a continually rising long-run average cost curve.

at low output and but diseconomies of scale at high output is a natural monopoly.

at any particular level of output is a natural monopoly.

over the entire range of output demanded is a natural monopoly.

QUESTION 9

1. A consumer's spending is restricted because of:

utility maximization.

a budget constraint

.marginal utility.

total utility.

QUESTION 10

1. A key element that a public good displays is:

nonexclusion.

payment through charitable contributions.

overproduction.

rival consumption.

QUESTION 11

1. An example of a common resource is:

any private good that is monopolized.

coffee sold in coffee shops.

fishing in the ocean.

any type of public good.

QUESTION 12

1. A feature of monopolistic competition that makes it different from monopoly is the:

downward-sloping marginal revenue curve.

number of firms in the industry

.fact that firms in monopolistically competitive industries follow the marginal decision rule, while monopolies do not.

downward-sloping demand curve.

QUESTION 13

1. Anefficiency wageis:

determined by collective bargaining between unions and management.

efficient because it is exactly equal to the wage rate implied by the marginal productivity theory.

above the equilibrium wage and is paid to provide workers with an incentive increase productivity.

equal to the value of the marginal product of laboradjusted so as to make the structure of compensation more equitable.

QUESTION 14

1. A firm that has diminishing returns in the management's ability to use and disseminate information as it increases production in the long run best demonstrates:

economies of scale.

being too small for the relevant market

.not having enough managers.

diseconomies of scale.

QUESTION 15

1. A downward-sloping demand curve will ensure that:

P<MR.

P>MR.

P=MC.

P=MR.

QUESTION 16

1. A firm that is in an oligopoly knows that its _____ affect its _____ and that the _____ of its rivals will affect it.

actions rarely; rivals; actions

actions; rivals; reactions

price changes; total revenue in a positive way; reactions

price increases; total revenue in the long run only; large but not small price changes

QUESTION 17

1. A high-income household is taxed a certain amount of money. A low-income household receives financial assistance in the same amount from government. The value of the marginal dollar of the financial assistance to the family and the taxes paid by the high-income family are:

different, since the marginal dollar is worth more to the low-income family.

different, since the high-income family's lost income will keep them from buying necessities.

the same, since it is the same amount of money.

unimportant in determining the impact of this plan on the welfare state.

QUESTION 18

1. A fixed cost:

decreases until the point of diminishing returns is reached.

can be positive, even if the firm doesn't produce any output in the short run.

will exist only in the long run.

depends on the level of output.

QUESTION 19

1. A firm's demand curve for labor is:

its marginal cost curve.

its value of the marginal product of labor curve.

its marginal product curve.

horizontal if it is in perfect competition.

QUESTION 20

1. An industry that consists of two firms is:

a duopoly.

a monopoly

.monopolistic competition.

a monopsony.

QUESTION 21

1. A firm's demand curve for labor in a perfectly competitive market is the downward-sloping portion of its _____ curve.

average total cost

value of the marginal product of labor

marginal revenue

total revenue

QUESTION 22

1. A firm's marginal cost is:

the ratio of the change in total output to the change in the quantity of labor.

the slope of the average variable cost curve.

the slope of the total cost curve.

the ratio of the change in fixed cost to the change in the quantity of output.

QUESTION 23

1. Advertising is an example of:

nonprice competition.

price leadership.

antitrust policy.

tacit collusion.

QUESTION 24

1. A factor demand curve will shift because:

of a change in the proportion of the factor's cost relative to total cost.

the slope of theMPcurve is negative.

of a change in the price of the good the factor produces.

the elasticity of demand for the final product is high.

QUESTION 25

1. A common example of monopolistic competition is the market for:

1-inch nails.

gas stations

.oranges.

automobiles.

QUESTION 26

1. An effective price floor would result in:

a shortage of the good.

a quantity control.

a surplus of the good.

an equilibrium price.

QUESTION 27

1. Comparative advantage arises from:

an emphasis on export production.

differences in climate, factor endowments, and technology.

absolute advantage.

countries engaging in autarkic behavior

QUESTION 28

1. A price ceiling is:

a minimum price buyers are required to pay for a good or service.

a maximum price sellers are allowed to charge for a good or service

.the deadweight loss caused by an inefficiently low quantity.

the difference between the quantity supplied and quantity demanded.

QUESTION 29

1. An "either-or" decision entails:

a choice between two activities.

calculating marginal costs for each activity.

calculating the marginal benefits for each activity.

deciding how much of an activity to do.

QUESTION 30

1. An increase in supply is caused by:

suppliers' expectations of higher prices in the future

.a decrease in the price of resources used in production.

an increase in input prices

.an increase in the price of the good.

QUESTION 31

1. A price ceiling is not effective if:

it is set above the equilibrium price.

it is set below the equilibrium price.

the equilibrium price is above the price ceiling

.it creates a shortage.

QUESTION 32

1. An effective price ceiling will most likely result in:

a decrease in consumer surplus.

an increase in consumer surplus.

no change in either producer or consumer surplus.

an increase in producer surplus.

QUESTION 33

1. An example of an import quota is a:

tax of 10% of the value of each Honda automobile imported from Japan.

subsidy from the Japanese government of $500 for each Honda automobile imported into the United States.

regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines

limit on the total number of Honda automobiles imported from Japan.

QUESTION 34

1. Comparative advantage in international trade:

provides benefits to developed countries only.

is used only by large countries

.is used to determine whether trade will be beneficial to both countries involved.

does not determine what goods countries should produce.

QUESTION 35

1. Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

must decrease

.may increase or decrease.

will increase, too.

will not change.

QUESTION 36

1. A price floor or a price ceiling is an example of:

a quota

.a quantity control

.a price control.

market equilibrium price.

QUESTION 37

1. A price floor is likely to cause deadweight loss because:

some buyers who want to buy at the controlled price are unable to find a seller willing to sell at that price

.a black market emerges and the good sells at prices above the price floor.

quantity of the good is less than the equilibrium quantity

buyers incur additional search costs looking for the scarce good.

QUESTION 38

1. An example of a tariff is a:

tax of 10% of the value of each Honda automobile imported from Japan

.regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines.

limit on the total number of Honda automobiles imported from Japan.

tax of $500 on each Honda automobile produced in the United States.

QUESTION 39

1. A demand curve that is perfectly inelastic is:

upward-sloping

.horizontal

.vertical.

downward-sloping.

QUESTION 40

1. A person with loss aversion:

is more likely to use a credit card than to pay cash.

is likely to maximize total revenue rather than profit.

has a hard time recognizing losing investments and moving on.

is unlikely to ignore sunk costs.

QUESTION 41

1. A maximum price set below the equilibrium price is a:

price floor.

price ceiling.

supply price.

demand price.

QUESTION 42

1. A perfectly elastic supply curve is:

upward-sloping

.horizontal

.vertical.

downward-sloping.

QUESTION 43

1. A price control is:

a tax on the sale of a good that controls the market price.

control of the price of a good by the firm that produces it.

a legal restriction on how high or low a price in a market may go.

an upper limit on the quantity of some good that can be bought or sold.

QUESTION 44

1. A binding price floor is a _____ set _____ the equilibrium price.

maximum price; above

minimum price; above

minimum price; at

maximum price; below

QUESTION 45

1. A price ceiling on a good often results in:

a more efficient allocation of the good to buyers

.a surplus of the product.

black market or underground transactions of the good.

more communication between buyers and sellers about the appropriate price.

QUESTION 46

1. A person who is risk averse:

always makes irrational decisions.

is willing to pay to avoid economic loss.

enjoys taking risks.

always makes rational decisions.

QUESTION 47

1. A binding price floor in the market for wheat:

does not change the price received by farmers.

decreases the price received by farmers.

decreases the price paid by consumers.

increases the price paid by consumers.

QUESTION 48

1. A price ceiling results in:

a decrease in wasted resources, as consumers find such goods more easily.

inefficiency because transactions are held below the equilibrium quantity.

inefficiency resulting from overproduction of the good.

surpluses in the market, which eventually lead to inefficient production costs.

QUESTION 49

1. An increase in the wage rate will:

possibly lead people to choose more leisure rather than work more, since leisure is a normal good.

cause businesses to increase the number of employees to reduce costs.

normally generate a small income effect.

generate a significant decrease in after-tax income.

QUESTION 50

1. A consumer's willingness to pay depends on:

the expected additional benefit of consuming the good or service

the size of the shortage of the good or service.

the cost of producing the good or service.

the size of the surplus of the good or service.