The market for plumbing services in a city can be characterized by the model of monopolistic competition. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services. We expect that in the long run:

Question 12Select one:

a.

firms will leave the plumbing market.

b.

there will be a short-run increase in the number of firms, but then the number will return to the original level.

c.

new firms will enter the plumbing market.

d.

firms will shut down, but they will not leave the industry.

According to the Case in Point on hockey teams, economic theory predicts that if a sports team consistently sells out its games, it will operate at a quantity where marginal revenue is:

Question 13Select one:

a.

the highest possible.

b.

positive.

c.

negative.

d.

equal to marginal cost and both are equal to zero.

To practice effective price discrimination, a firm must:

Question 14Select one:

a.

have some degree of monopoly power.

b.

avoid detection by government regulatory agencies.

c.

enable the resale of goods between groups of buyers.

d.

calculate the utility level of each buyer in the market.

The natural rate of unemployment:

Question 15Select one:

a.

increases during recessions.

b.

equals the sum of frictional and cyclical unemployment.

c.

equals the sum of frictional and structural unemployment.

d.

is always less than full employment rate of unemployment.

An oligopoly knows that its _______ affect(s) its _______ and that the _______ of its rivals will affect it.

Question 16Select one:

a.

actions; rivals; reactions

b.

price changes ; total revenue in a positive way; reactions

c.

actions rarely; rivals; actions

d.

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

Charges that are paid for factors of production are called:

Question 17Select one:

a.

implicit costs.

b.

opportunity costs.

c.

fixed costs.

d.

explicit costs.

According to the international trade effect, holding everything else unchanged,

Question 18Select one:

a.

an increase in net exports shifts the aggregate demand curve to the right.

b.

an increase in the domestic price level reduces net exports leading to a movement along the aggregate demand curve.

c.

an increase in the exchange rate shifts the aggregate demand curve to the right.

d.

an increase in the prices of foreign goods level reduces imports leading to a movement along the domestic economy's aggregate demand curve.

Which one of the following is an example of a frictionally unemployed individual?

Question 19Select one:

a.

Martin, who lacks the skills necessary to be employed as a machinist.

b.

Lee, who lost his job as an art director because of a recession.

c.

Jan, who has a Ph.D. in economics, but is a bus driver.

d.

Helena, who has just graduated from college and is searching for a job as an architect.

Perfect competition is important to study because it:

Question 20Select one:

a.

is a theoretical extreme used for analysis.

b.

is a realistic model of a few key markets.

c.

is a realistic model of many different markets.

d.

avoids all real-world problems and complexities.

Monopolistic competition is an industry characterized by:

Question 21Select one:

a.

a product with no close substitutes.

b.

a horizontal demand curve.

c.

a small number of firms.

d.

relatively easy entry and exit.