Quiz Let

Terms in this set (65)
Economic costs of an input include

Select one:
a. only implicit costs.
b. only explicit costs.
c. both implicit and explicit costs.
d. whatever management wishes to report to the shareholders.
c. both implicit and explicit costs. Correct
Johnny has worked as a CPA for five years and wants to open his own public accounting practice. The cost of his college degree
Select one:
a. the opportunity cost of this endeavor.
b. a sunk cost.
c. an expense.
d. a variable cost.
b. a sunk cost. Correct
If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measure
Select one:
a. the monthly mortgage payment the firm must pay.
b. the price the firm paid divided by twelve.
c. zero.
d. the rent the firm could earn if it rented the building to another firm.
d. the rent the firm could earn if it rented the building to another firm. Correct
Economic efficiency entails
Select one:
a. producing a given amount of output with the most expensive mix of inputs.
b. producing a given amount of output with the least number of inputs.
c. producing a given amount of output with the most inputs.
d. producing a given amount of output with the cheapest mix of inputs.
d. producing a given amount of output with the cheapest mix of inputs. Correct
A firm's marginal cost can always be thought of as the change in total cost if
Select one:
a. the firm produces one more unit of output.
b. the firm buys one more unit of capital.
c. the firm's average cost increases by $1.
d. the firm moves to the next highest isoquant
a. the firm produces one more unit of output. Correct
Variable costs are
Select one:
a. a production expense that does not vary with output.
b. a production expense that changes with the quantity of output produced.
c. equal to total cost divided by the units of output produced.
d. the amount by which a firm's cost changes if the firm produces one more unit of output.
b. a production expense that changes with the quantity of output produced. Correct
Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. The marginal cost of the 5th T-shirt is
Select one:
a. 2.
b. 10.
c. 12.
d. 60.
a. 2. Correct
Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. The average cost of the 5th T-shirt is
Select one:
a. 2.
b. 12.
c. 52.
d. 60.
12
Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. Which of the following statements is TRUE at a
Select one:
a. MC = AVC
b. MC = AC
c. MC > AFC
d. All of the above.
a. MC = AVC Correct
Suppose the short-run production function is q = 10L. If the wage rate is $10 per unit of labor, then AVC equals
Select one:
a. q.
b. q/10.
c. 10/q.
d. 1.
1
In the short run, the point at which diminishing marginal returns to labor begin is the point at which the marginal cost curve
Select one:
a. peaks.
b. bottoms out.
c. is upward sloping.
d. is downward sloping.
b. bottoms out. Correct
If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be
Select one:
a. AFC is falling.
b. AVC is rising.
c. MC > AVC.
d. All of the above. Correct
Which of the following will cause the average cost curve of making cigarettes to shift?
Select one:
a. A $5 million penalty charged to each cigarette maker.
b. A $1 per pack tax on cigarettes.
c. A $1 an hour wage increase paid to all cigarette production workers.
Marginal cost is
Select one:
a. positive or zero.
b. negative or zero.
c. positive or negative but not zero.
d. positive, negative, or zero.
a. positive or zero. Correct
Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of ga
Select one:
a. shift the marginal cost curve up.
b. shift the marginal cost curve down.
c. shift the average fixed cost curve up.
d. shift the average fixed cost curve down.
a. shift the marginal cost curve up. Correct
In the long run, fixed costs are
Select one:
a. sunk.
b. avoidable.
c. larger than in the short run.
d. not included in production decisions.
b. avoidable. Correct
When the isocost line is tangent to the isoquant, then
Select one:
a. MRTS = -w/r
b. the firm is producing that level of output at minimum cost.
c. the last dollar spent on capital yields as much extra output as the last dollar spent on labor.
When the isocost line is tangent to the isoquant, then
Select one:
a. MPL = MPK
b. the firm is producing that level of output at minimum cost.
c. the firm has achieved the right economies of scale.
b. the firm is producing that level of output at minimum cost. Correct
The slope of the isocost line tells the firm how much
Select one:
a. capital must be reduced to keep total cost constant when hiring one more unit of labor.
b. capital must be increased to keep total cost constant when hiring one more unit of labor.
c. more expensive a unit of capital costs relative a unit of labor.
d. the isocost curve will shift outward if the firm wishes to produce more.
a. capital must be reduced to keep total cost constant when hiring one more unit of labor. Correct
If the marginal rate of technical substitution for a cost minimizing firm is 10, and the wage rate for labor is $5, what is the renta
Select one:
a. .5
b. 1
c. 2
d. 10
0.5
The long run average cost curve may initially slope downward due to
Select one:
a. decreasing average fixed costs.
b. increasing marginal returns.
c. economies of scale.
c. economies of scale. Correct
If there are diseconomies of scale within a given range of output, which of following is(are) TRUE?
Select one:
a. The short-run average cost curve must be upward sloping within that range of output.
b. The long-run average cost curve must be upward sloping within that range of output.
c. Long-run average cost must equal short-run average cost.
b. The long-run average cost curve must be upward sloping within that range of output. Correct
Long-run average cost is never greater than short-run average cost because in the long run
Select one:
a. capital costs equal zero.
b. the firm can move to the lowest possible isocost curve.
c. wages always increase over time.
d. wages always decrease over time.
b. the firm can move to the lowest possible isocost curve. Correct
Why do many people choose to not read the manuals included with their new computer?
Select one:
a. They perceive that learning by doing decreases costs faster than learning by reading.
b. They perceive that learning by doing is more enjoyable than learning by reading.
c. They perceive that learning by reading is not sophisticated.
d. They perceive that learning by doing is better than learning by reading.
a. They perceive that learning by doing decreases costs faster than learning by reading. Correct
Suppose the cost of producing two goods, x and y, can be represented as C = ax + by + cxy. If there are economies of scope, the
Select one:
a. c > 0
b. a + b = -c
c. c = 0
d. c < 0
d. c < 0 Correct
What is one of the biggest differences between a sole proprietorship and a corporation?
Select one:
a. Sole proprietorships offer stock.
b. Corporation shareholders elect the managers of the firm.
c. Sole proprietorships have limited liability.
d. Corporations are the only profitable firms.
b. Corporation shareholders elect the managers of the firm. Correct
Which entity produces the greatest proportion of U.S. gross national product?
Select one:
a. government
b. non-profit organizations such as hospitals
c. firms
d. universities
c. firms Correct
Technological efficiency is
Select one:
a. a necessary and sufficient condition for profit maximization.
b. a sufficient but not necessary condition for profit maximization.
c. a necessary but not sufficient condition for profit maximization.
d. a theoretical construct with little connection to the real world.
c. a necessary but not sufficient condition for profit maximization. Correct
Which of the following statements best describes a production function?
Select one:
a. The maximum profit generated from given levels of inputs.
b. The maximum level of output generated from given levels of inputs.
c. All levels of output that can be generated from given levels of inputs.
d. All levels of inputs that could produce a given level of output.
b. The maximum level of output generated from given levels of inputs. Correct
With respect to production, the short run is best defined as a time period
Select one:
a. lasting about six months.
b. lasting about two years.
c. in which all inputs are fixed.
d. in which at least one input is fixed.
d. in which at least one input is fixed. Correct
The above figure depicts a short-run production function for Albert's Pretzels. The marginal productivity of labor
Select one:
a. rises then falls as the amount of capital increases.
b. falls then rises as the amount of labor increases.
c. is greater than or equal to the average productivity of labor for all amounts of labor.
d. is less than or equal to the average productivity of labor for all amounts of labor.
d. is less than or equal to the average productivity of labor for all amounts of labor. Correct
The above figure shows the short-run production function for Albert's Pretzels. The marginal productivity of labor for the third
Select one:
a. 6.
b. 8.
c. 24.
d. not known from the information provided.
6
The above figure shows the short-run production function for Albert's Pretzels. The law of diminishing marginal productivity
Select one:
a. appears with the second worker.
b. has not yet appeared for any of the levels of labor.
c. first appears with the fifth worker.
d. is refuted by this evidence.
a. appears with the second worker. Correct
The above figure shows the short-run production function for Albert's Pretzels. The average product of labor
Select one:
a. increases first and then decreases.
b. decreases first and then increases.
c. decreases throughout.
d. increases throughout.
c. decreases throughout. Correct
Total Product is
Select one:
a. the change in total product resulting from an extra unit of labor, holding other factors constant.
b. the ratio of output to the number of workers used to produce that output.
c. the amount of output that can be produced by a given amount of labor.
d. equal to the marginal product of labor when the average product is increasing.
c. the amount of output that can be produced by a given amount of labor. Correct
At any given point on the curve, the slope of the total product curve always equals
Select one:
a. the ratio of the marginal product and the average product.
b. the change in input divided by the change in output.
c. the average product of the input.
d. the marginal product of the input.
d. the marginal product of the input. Correct
Which of the following statements best summarizes the law of diminishing marginal returns?
Select one:
a. In the short run, as more labor is hired, output diminishes.
b. In the short run, as more labor is hired, output increases at a diminishing rate.
c. In the short run, the amount of labor a firm will hire diminishes as output increases.
d. As more labor is hired, the length of time that defines the short run diminishes.
b. In the short run, as more labor is hired, output increases at a diminishing rate. Correct
An isoquant represents levels of capital and labor that
Select one:
a. have constant marginal productivity.
b. yield the same level of output.
c. incur the same total cost.
b. yield the same level of output. Correct
Suppose the production of paved roadways can be represented as q=L^0.5+K^0.5
Which of the following statements is (are) TRUE?
Select one:
a. Labor is subject to diminishing marginal productivity in the short run.
b. Labor and capital are imperfect substitutes.
c. The isoquants for paved roadways are convex.
L-shaped isoquants imply that production requires that the inputs
Select one:
a. are perfect substitutes.
b. are imperfect substitutes.
c. cannot be used together.
d. must be used together in a certain proportion.
d. must be used together in a certain proportion. Correct
The slope of an isoquant tells us
Select one:
a. how much output increases when both inputs are increased.
b. the increase in MPL when capital increases.
c. the decrease in capital necessary to keep output constant when labor increases by one unit.
d. the decrease in capital necessary to keep MPL constant when labor increases by one unit.
c. the decrease in capital necessary to keep output constant when labor increases by one unit. Correct
The marginal rate of technical substitution (MRTS) always equals
Select one:
a. the slope of the total product curve.
b. minus the ratio of the marginal products of inputs.
c. the change in output due to a change in the amount of one input.
d. the distance between two isoquants.
b. minus the ratio of the marginal products of inputs. Correct
Returns to scale refers to the change in output when
Select one:
a. all inputs increase proportionately.
b. labor increases holding all other inputs fixed.
c. capital equipment is doubled.
d. specialization improves.
a. all inputs increase proportionately. Correct
he table in the above figure shows the levels of output resulting from different levels of inputs. Which of the following conclusi
Select one:
a. Increasing returns to scale exist between 100 and 200 units of output.
b. Constant returns to scale exist throughout all levels of production.
c. Labor is subject to diminishing marginal productivity in the short run.
d. No firm conclusions can be drawn.
a. Increasing returns to scale exist between 100 and 200 units of output. Correct
The table in the above figure shows the levels of output resulting from different levels of inputs. At which level of input are the
Select one:
a. 400-600 units
b. Constant returns to scale exist throughout all levels of production.
c. Constant returns to scale do not exist at any level of production.
d. No firm conclusions can be drawn.
a. 400-600 units Correct
Let the production function be q=AL^aK^b
Returns to scale are equal to
Select one:
a. a * b.
b. a + b.
c. L^a+K^b
d. A * L.
b. a + b. Correct
Suppose the production of video cassette recorders (VCRs) can be represented by the following production function: q=A^L0.4
. Which of the following statements is (are) TRUE?
Select one:
a. The production function has decreasing returns to scale.
b. The marginal productivity of labor falls as labor increases in the short run.
c. Capital and labor can be substituted for one another.
The above figure shows the isoquants for producing steel. Increasing returns to scale are
Select one:
a. present when producing less than 10,000 tons.
b. present when producing less than 20,000 tons.
c. present when producing less than 30,000 tons.
d. never present.
a. present when producing less than 10,000 tons. Correct
The above figure shows the isoquants for producing steel. Decreasing returns to scale are
Select one:
a. present when producing more than 10,000 tons.
b. present when producing more than 20,000 tons.
c. present when producing more than 30,000 tons.
d. never present.
b. present when producing more than 20,000 tons. Correct
The above figure shows the isoquants for producing steel. Constant returns to scale are
Select one:
a. present when producing less than 10,000 tons.
b. present when producing between 10,000 and 20,000 tons.
c. present when producing more than 20,000 tons.
d. never present.
b. present when producing between 10,000 and 20,000 tons. Correct
Economists typically assume that the owners of firms wish to
Select one:
a. produce efficiently.
b. maximize sales revenues.
c. maximize profits.
c. maximize profits. Correct
Albert's Pretzel Baking Company used to have four workers who were each in charge of making their own pretzels from start to
Select one:
a. neutral technical change.
b. labor-saving technical change.
c. division of labor.
d. economies of scale.
c. division of labor. Correct
Consider Johnson Mechanical is the only seller in its particular regional market. On the other hand, Amato Mechanical is one o
Select one:
a. Johnson Mechanical to be relatively more productive than Amato Mechanical.
b. Amato Mechanical to be relatively more productive than Johnson Mechanical.
c. no difference in productivity between the two firms.
d. Amato Mechanical might be more productive than Johnson Mechanical, but only if management for Amato Mechanical is a
b. Amato Mechanical to be relatively more productive than Johnson Mechanical. Correct
As the price of a good rises, the consumer will experience
Select one:
a. a desire to consume a different bundle.
b. a decrease in utility.
c. a southern or western movement on the indifference map.
In the relevant price range a demand curve for a Giffen good would be
Select one:
a. upward sloping.
b. downward sloping.
c. horizontal.
d. vertical.
a. upward sloping. Correct
When the price of a good changes, the total effect of the price change on the quantities purchased can be found by comparing
Select one:
a. on the old budget line and the new budget line.
b. on the original indifference curve when faced with the original prices and when faced with the new prices.
c. on the new budget line and a hypothetical budget line that is a parallel shift back to the original indifference curve.
d. on the new indifference curve.
a. on the old budget line and the new budget line. Correct
When the price of a good changes, the substitution effect can be found by comparing the equilibrium quantities purchased
Select one:
a. on the old budget line and the new budget line.
b. on the original indifference curve when faced with the original prices and when faced with the new prices.
c. on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new
d. on the new indifference curve.
b. on the original indifference curve when faced with the original prices and when faced with the new prices. Correct
If a good is an inferior good, then its
Select one:
a. demand curve will be upward sloping.
b. income effect reinforces the substitution effect.
c. income elasticity is negative.
d. Engel curve cannot be drawn.
c. income elasticity is negative. Correct
In the case of a normal good
Select one:
a. demand curves always slope downward.
b. the income effect and substitution effect are in the same direction.
c. the Engel curve slopes upward.
d. All of the above
d. All of the above
If the average product of labor when 5 workers are employed is 10, and when 6 workers are employed is 12, then
Select one:
a. The marginal product curve lies above the average product curve between 5 and 6 workers.
b. The marginal product curve lies below the average product curve betwee 5 and 6 workers.
c. The total product curve is decreasing between 5 and 6 workers.
d. Marginal product is negative.
The marginal product curve lies above the average product curve between 5 and 6 wor
When the total product curve is increasing at an increasing rate
Select one:
a. Marginal product is positive but declining.
b. Average product is zero.
c. The marginal product curve lies below the average product curve.
d. Marginal product is positive and increasing.
d. Marginal product is positive and increasing.
Suppose 5 labores working working on 10 acres of land are able to produce 4,000 bushels of corn, and 6 laborers working on 1
Select one:
a. Increasing returns to scale.
b. Constant returns to scale.
c. Decreasing returns to scale.
d. Diminishing marginal returns.
a. Increasing returns to scale.
Suppose an isoquant is a straight line with a slope of -1. What does this imply concerning the marginal rate of technical substit
the MRTS is constant
What does it imply concerning the marginal products of the two inputs?
the ratio of the marginal products is constant
True or False: The substitution effect is the same whether the good is a normal good or an inferior good.
Select one:
1
0
1
This is an example of
When individuals come together to buy and sell goods and services, they form a(n)
a. economy
b. market
c. production possibilities frontier
d. supply curve
e. demand curve
Click card to see the definition �

B
Click again to see the term �
Which of the following statements about markets is false?
a. markets are used to allocate resources in market systems
b. markets can vary in geographical size
c. prices are used to allocate goods in markets
d. markets are used to allocate resources in centrally-planned socialist economic systems
e. supply and demand explains how prices are set in competitive markets
D
1/157
When individuals come together to buy and sell goods and services, they form a(n)
a. economy
b. market
c. production possibilities frontier
d. supply curve
e. demand curve
B
Which of the following statements about markets is false?
a. markets are used to allocate resources in market systems
b. markets can vary in geographical size
c. prices are used to allocate goods in markets
d. markets are used to allocate resources in centrally-planned socialist economic systems
e. supply and demand explains how prices are set in competitive markets
D
In a perfectly competitive market,
a. there can be few or many buyers and sellers
b. the price is driven upward when suppliers hold back on goods and services
c. each participant is too small to affect the market price
d. government intervention is needed to ensure that prices are fair for consumers
e. resources are allocated by a central authority
C
Suppose that a large dairy farmer is able to raise the market price of milk by withholding milk supply from the market. In this in
a. the milk market is perfectly competitive
b. buyers will decrease their demand for milk
c. buyers will increase their demand for milk
d. the milk market is imperfectly competitive
e. the milk market will collapse in the long run
D
A group of buyers and sellers with the potential to trade with each other is known as a(n)
a. trading bloc
b. cartel
c. market
d. industry
e. sector
C
The market for General Motors' bonds
a. exists only within the geographical boundaries of the United States
b. is not defined by its geographic location
c. is at the New York Stock Exchange
d. is at the U.S. Treasury
e. is in London, England
B
The market for a particular good is more likely to be local
a. the lower the cost of transporting the good and the greater the ease of communication between buyers and sellers
b. the higher the cost of transporting the good and the greater the ease of communication between buyers and sellers
c. the lower the cost of transporting the good and the greater the ease of determining the good's quality
d. the lower the cost of transporting the good and the more difficult the communication between buyers and sellers
e. the higher the cost of transporting the good and the more difficult the communication between buyers and sellers
E
In analyzing the market for a particular good, the most appropriate size of the market to consider
a. is the global market
b. is a local market
c. is a national market
d. is a state-wide market
e. depends on the purpose of the analysis
E
In a market system, prices are determined by
a. corporate executives
b. government bureaucrats
c. supply and demand
d. total market demand
e. production costs
C
In a circular flow diagram of the economy, households and businesses interact
a. in both product markets and resource markets
b. in neither product markets and resource markets
c. in product markets but not resource markets
d. in resource markets but not product markets
e. very rarely
A
When households and businesses interact in resource markets money
a. is not exchanged
b. is flowing toward businesses
c. is flowing toward households
d. is not used at all
e. is flowing to both businesses and households
C
When households and businesses interact in product markets money
a. is not exchanged
b. is flowing toward businesses
c. is flowing toward households
d. is not used at all
e. is flowing to both businesses and households
B
When households and businesses interact in product markets goods and services are
a. not exchanged
b. flowing toward businesses
c. flowing toward households
d. not used at all
e. flowing to both businesses and households
C
When households and businesses interact in product markets resources are
a. not exchanged
b. flowing toward businesses
c. flowing toward households
d. not used at all
e. flowing to both businesses and households
B
The law of demand says that as the price of a good rises, the quantity demanded of the good tends to fall.
a. True
b. False
A
The amount of a good or service that buyers would be willing and able to purchase at a specific price is known as
a. quantity demanded
b. demand
c. supply
d. quantity supplied
e. opportunity cost
A
The term quantity demanded
a. can refer to either an individual or all buyers in a market
b. only refers to all buyers in a specific market
c. only refers to individual buyers in a market
d. refers to how many units of a good a buyer would be willing and able to purchase at a series of prices
e. determines price when it intersects with the supply curve
A
Because price and quantity demanded are inversely related,
a. the demand curve is usually upward-sloping
b. buyers purchase more of the good as the price rises
c. the supply curve must be rising
d. price and quantity supplied must be positively related
e. the demand curve is usually downward-sloping
E
The demand curve for dolls shows the quantity of dolls demanded
a. by suppliers of those dolls
b. by U.S. consumers
c. at the equilibrium price for dolls
d. at each level of income
e. at each possible price of dolls
E
The amount of a commodity that buyers in the market would like to purchase at a particular price is
a. equilibrium
b. quantity supplied
c. quantity produced
d. infinite
e. quantity demanded
E
According to the law of demand,
a. there is a positive relationship between quantity demanded and price
b. as the price rises, demand will shift to the left
c. there is a negative relationship between quantity demanded and price
d. as the price rises, demand will shift to the right
e. as the price rises, consumers will continue to purchase the same quantity of the good
C
Each point along the market demand curve shows
a. the quantity of the good that firms would be willing and able to supply at a specific price
b. the relationship between the price of the good and total quantity demanded at a series of prices
c. the opportunity cost of supplying a given quantity of goods to the market
d. the quantity of the good that consumers would be willing and able to purchase at a specific price
e. how population changes affect the quantity demanded at a specific price
D
The law of demand states that the quantity demanded of a good and
a. the price of a substitute are positively related
b. its price are inversely related
c. its price are positively related if it is an inferior good
d. the wealth of buyers are positively related
e. its price are inversely related if it is a normal good
B
The demand curve for a particular good indicates the various quantities
a. demanded at various prices, other things equal
b. demanded at different income levels, other things equal
c. actually purchased at various prices, other things equal
d. actually purchased at different income levels, other things equal
e. demanded at various prices and income levels, other things equal
A
The law of demand says that
a. the customer is always right
b. quantity supplied equals quantity demanded
c. price and quantity supplied are inversely related
d. price and quantity demanded are inversely related
e. income and quantity demanded are directly related
D
The demand curve for apples slopes downward
a. because supply and demand are equal in equilibrium
b. since producers supply more when consumers demand more
c. because people are assumed to be basically greedy
d. because the law of demand holds in the market for apples
e. because apples are preferred to all other goods
D
Which of the following statements about demand is correct?
a. A change in the price of bicycles will not lead to a shift of the demand curve for bicycles.
b. A change in the price of automobiles will lead to a shift of the demand curve for motorcycles.
c. A change in demand is equivalent to a movement along a given demand curve.
d. When price falls, so does the quantity demanded.
e. When the demand curve shifts to the right, so will the supply curve.
A
A decrease in the price of a particular good, with all other variables constant, causes
a. a shift to a different demand schedule with higher quantities demanded
b. a shift to a different demand schedule with lower quantities demanded
c. a movement along a given demand curve to a lower quantity demanded
d. a movement along a given demand curve to a higher quantity demanded
e. no movement along a given demand curve unless supply also changes
D
If automobiles are like most goods and the price of automobiles rises, then holding all else constant, the
a. demand for automobiles will rise
b. quantity demanded of automobiles will fall
c. demand for automobiles will fall
d. quantity demanded of automobiles will rise
e. supply of automobiles will fall
B
An increase in the price of a good results in a(n)
a. decrease in demand
b. increase in demand
c. increase in quantity demanded
d. decrease in quantity demanded
e. increase in supply
D
The demand curve for a product will shift rightward when the price of a substitute decreases.
a. True
b. False
B (demand curve will shift leftward)
If the demand for new automobiles falls when income falls, automobiles are said to be normal goods.
a. True
b. False
A
Both the supply and demand curves can shift due to changes in income.
a. True
b. False
B (only the demand curve shifts)
If the price of jelly (a complement with peanut butter) decreases, both the demand and supply curves of peanut butter will shi
a. True
b. False
B (since they are substitutes, the demand and supply curves for peanut butter will shift leftward)
The quantity demanded of a good
a. is the amount that would be purchased with an unlimited income
b. is the amount that would be demanded even if income were zero
c. is subject to the buyer's income constraints
d. is a fixed amount unaffected by the buyer's circumstances
e. must match the amount actually purchased in the market
C
All of the following, except one, would increase the demand for a particular model of a Ford automobile. Assume that this mod
a. an increase in buyers' incomes
b. increased prices of other Ford models
c. an expected future increase in the price
d. an increase in the U.S. population
e. a decrease in the price of steel
E
Which of the following would not cause the demand curve for college football tickets to shift?
a. an increase in the price of professional football tickets
b. a decrease in the price of college basketball tickets
c. an increase in the price of college football tickets
d. a drop in student incomes
e. an increase in student preferences for college football tickets
C
An increase in the population will lead to
a. a rightward shift in every individual's demand curve
b. no shift in the market demand curve
c. a rightward shift in the market demand curve
d. a rightward movement along every individual's demand curve
e. a rightward movement along the market demand curve
C
Which of the following could cause the market demand curve for hot dogs to shift to the left?
a. an increase in the price of hot dogs
b. a decrease in the price of hamburgers
c. an increase in the size of the population
d. an increase in the price of hot dog buns or rolls
e. an increase in the price of mustard
D
If the price of orange juice rises, the demand for grapefruit juice will
a. increase because the two goods are substitutes
b. increase because it is a complement
c. decrease because the two goods are substitutes
d. decrease because the two goods are complements
e. not change unless the price of grapefruit juice also changes
A
If the price of ground beef falls, the demand for hamburger buns will
a. increase because the two goods are substitutes
b. decrease because the two goods are complements
c. decrease because the two goods are substitutes
d. increase because the two goods are complements
e. not change unless the price of hamburger buns also changes
D
An increase in buyers' incomes
a. increases the quantity demanded of a good
b. decreases the quantity demanded of a good
c. increases the demand for a normal good
d. increases the demand for an inferior good
e. decreases the quantity demanded of a normal good
C
Which of the following would increase the amount of an inferior good that buyers would like to purchase?
a. an increase in buyers' incomes
b. an increase in the price of a complement
c. a decrease in the price of a substitute
d. a decrease in buyers' incomes
e. a decrease in its expected future price
D
The economic model of demand
a. explains the consequences of a change in buyers' tastes, but not the causes
b. explains the causes of a change in buyers' tastes, but not the consequences
c. explains both the causes and consequences of a change in buyers' tastes
d. explains neither the causes nor the consequences of a change in buyers' tastes
e. ignores buyers' tastes because they are too unstable to include in the model
A
Which of the following is assumed constant along the demand curve for gasoline?
a. the price of gasoline and the prices of related goods
b. the price of gasoline, buyers' incomes, and tastes
c. all variables affecting demand other than the price of gasoline
d. all variables affecting demand other than the supply of gasoline
e. buyers' incomes and tastes, but not the prices of related goods
C
Which of the following would shift the demand curve for new college textbooks to the right?
a. an increase in the price of new college textbooks
b. a decrease in the price of new college textbooks
c. an increase in the price of used college textbooks
d. a decrease in the population of college students
e. a decrease in the wealth of college students
C
Which of the following would shift the demand curve for the normal good regular vanilla ice cream to the left?
a. reports of health risks as a result of eating vanilla ice cream
b. an increase in the price of frozen yogurt
c. a decrease in the price of hot fudge sauce
d. an increase in the price of regular vanilla ice cream
e. an increase in buyers' incomes
A
A substitute good is one that
a. appeals to a wide spectrum of consumers
b. is used together with another good
c. is exchanged on the black market
d. is produced by the same firm as another good
e. can be used in place of another good, fulfilling the same basic purpose
E
When there is a change in demand,
a. there is a rightward movement along the demand curve
b. there is a leftward movement along the demand curve
c. there is a shift of the supply curve
d. changes in price lead to different changes in quantity demanded
e. there is a shift of the demand curve
E
When demand increases,
a. consumers are willing and able to purchase more of the good at every price
b. consumers are willing and able to purchase less of the good at every price
c. there is a movement to the right along the demand curve
d. this is referred to as a change in quantity demanded
e. the price will tend to fall
A
A good is said to be a normal good when
a. decreases in income lead to an increase in demand for the good
b. decreases in income lead to a decrease in demand for the good
c. increases in income lead to a decrease in demand for the good
d. increases in price lead to a decrease in the quantity demanded of the good
e. increases in price lead to a decrease in demand for the good
B
"As income rises, the demand for most goods also rises." This statement
a. is inconsistent with the law of demand
b. suggests that many goods are inferior goods
c. shows that the quantity demanded is inversely related to price
d. suggests that most goods are normal goods
e. does not apply to goods traded in competitive markets
D
Betsy graduates from college, where she earned $3,000 a year working part-time, and takes a job as a third grade teacher, whe
a. bicycles are a normal good for Betsy
b. automobiles are an inferior good for Betsy
c. automobiles are a normal good for Betsy
d. Betsy's supply curve for automobiles is upward-sloping
e. bicycles and automobiles are complementary goods for Betsy
C
Income is to wealth as
a. hours are to minutes
b. inches are to feet
c. periods are to sentences
d. demand is to quantity demanded
e. learning is to knowledge
E
Which of the following could lead to a rightward shift of the demand curve for a good?
a. a decrease in the price of a substitute good
b. an increase in the price of a complementary good
c. a decrease in the price of the good, assuming it is a normal good
d. an increase in the price of the good, assuming it is an inferior good
e. expectations that the price of the good will rise in the future
E
Of the following, which is most likely to be a normal good?
a. hamburger
b. automobiles
c. used clothing
d. low-rent housing units
e. macaroni and cheese
B
Which of the following items is most likely to be an inferior good?
a. bus tickets
b. airline tickets
c. housing
d. stereo equipment
e. home computers
A
If Holly's demand for fast food decreases as her income rises, then
a. fast food is a normal good for her
b. the law of demand must apply
c. fast food is a complementary good
d. fast food is an inferior good for her
e. fast food is a substitute good
D
If two goods are often consumed together, they are
a. substitute goods
b. inferior goods
c. complementary goods
d. normal goods
e. unrelated goods
C
Which of the following are the best examples of substitute goods?
a. personal computers and computer software programs
b. milk and cookies
c. Packard Bell and IBM personal computers
d. hot dogs and mustard
e. contact lenses and lens cleaning solutions
C
Of the following, which could cause the demand curve for personal computers to shift to the left?
a. a decrease in the price of personal computers
b. an increase in the price of computer software
c. a decrease in the price of computer software
d. an increase in wealth (assuming personal computers are a normal good)
e. expectations of an increase in the price of personal computers in the future
B
Complementary goods
a. are usually used in conjunction with each other
b. are usually used in place of one another
c. do not adhere to the law of demand
d. are goods whose demand rises as incomes rise
e. are goods whose demand falls as wealth falls
A
Which of the following sets of goods are most likely to be complementary goods?
a. shoes and pizza
b. automobiles and computers
c. baseballs and baseball gloves
d. football tickets and baseball tickets
e. Dell and Gateway computers
C
All else constant, if butter and margarine are substitute goods, then as the price of butter rises,
a. the demand for margarine will fall
b. the quantity of butter demanded will fall
c. the demand for butter will fall
d. the demand for butter will rise
e. butter and margarine will become complementary goods, provided that butter is a normal good
B
Which of the following would not lead to a shift of the demand curve for apples?
a. an increase in the price of oranges
b. a decrease in incomes for consumers
c. a decrease in the supply of apples
d. an increased preference for apples
e. a decrease in the population
C
If a good is a normal good then
a. other things equal, no consumer will buy it
b. a rise in income or wealth will increase the amount of the good that consumers will purchase
c. a decline in income will increase the amount of it that consumers will purchase
d. abnormal goods are never substituted for it
e. normal consumers will always demand it
B
If an increase in a person's income causes that person to buy more apples, then apples are
a. neutral with respect to price
b. complements
c. inferior goods
d. normal goods
e. substitute goods
D
An increase in the number of buyers in the market causes
a. a decrease in equilibrium quantity
b. a decrease in equilibrium price
c. an increase in demand
d. a decrease in production
e. an increase in supply
C
If some piece of information causes buyers to expect the price of a good to rise in the future, but sellers take the same informa
a. a decrease in supply today
b. an increase in supply today
c. a decrease in quantity demanded today
d. an increase in demand today
e. an increase in quantity demanded today
D
If buyers' tastes and preferences shift in favor of a good, the result is
a. an increase in quantity demanded
b. an increase in demand
c. an increase in quantity demanded and an increase in supply
d. a decline in supply
e. an increase in supply
B
A decrease in demand for a normal good could be caused by a(n)
a. increase in price
b. decrease in price
c. decrease in consumer incomes
d. increase in consumer incomes
e. increase in production costs
C
Orange juice and cranberry juice are substitute goods. An increase in the price of orange juice results in a(n)
a. increase in the demand for orange juice
b. increase in the supply of cranberry juice
c. increase in the quantity demanded of orange juice
d. increase in the demand for cranberry juice
e. decrease in the quantity demanded of cranberry juice
D
Bread and butter are complements. A decrease in the price of bread results in a(n)
a. decrease in the supply of break
b. increase in the demand for butter
c. increase in the demand for bread
d. increase in resource prices
e. violation of the law of demand
B
If two goods are substitutes, then
a. an increase in the demand for one of them will lead to an increase in demand for the other
b. an increase in the demand for one of them will lead to a decrease in demand for the other
c. an increase in the supply of one of them will lead to an increase in supply of the other
d. an increase in the supply of one of them will lead to a decrease in supply for the other
e. they cannot be produced at the same time
A
If two goods are substitutes, then a(n)
a. increase in the demand for one of them will cause its price to fall
b. increase the supply of one of them will cause its price to rise
c. increase in the price of one of them will cause the demand for the other to increase
d. increase in the price of one of them will cause the supply of the other to increase
e. decrease in the price of one of them will cause the demand for the other to increase
C
If the price of leather (an input for leather shoes) increases, the equilibrium price of leather shoes will increase and the equilib
a. True
b. False
A
Supply curves usually slope upward because producers face increasing opportunity costs when increasing output.
a. True
b. False
A
The quantity supplied of a good
a. is the amount that sellers would provide if the firms faced no constraints
b. is the amount that sellers would provide if input prices were zero
c. must match the amount actually purchased in the market
d. is a fixed amount unaffected by the sellers' circumstances
e. is subject to the constraints imposed by technology and input prices
E
Which of the following best defines quantity supplied?
a. the amount of a good sellers would choose to produce, in a given set of circumstances
b. the amount of a good sellers will be able to sell, in a given set of circumstances
c. the various amounts of a good sellers would like to sell over various sets of circumstances
d. the amount of a good sellers would like to sell if they could choose the price for which it sold
e. the amount of a good that sellers would be able to sell if they could choose the price for which it sold
A
Of the following, which is true of the relationship between the quantity of a good supplied and its price?
a. As price increases, the quantity supplied usually decreases.
b. As price increases, the quantity supplied usually increases.
c. As price increases, supply increases.
d. When demand increases, so will supply.
e. They always meet at the point of equilibrium in the market.
B
Supply curves are usually assumed to slope upward because
a. profits fall as prices rise
b. a higher price leads to increases in demand
c. a higher price leads to decreases in demand
d. a higher price attracts resources from other less valued uses
e. firms drop out of the market as prices rise
D
Since producers must be compensated for the rising opportunity cost that accompanies increases in output,
a. the law of demand applies to most markets
b. supply curves usually slope downward
c. demand curves usually slope downward
d. supply curves usually slope upward
e. technical inefficiency would not exist in the long run
D
What do supply and demand curves have in common?
a. They both usually slope upward.
b. They both show a relationship between quantity and price.
c. They both usually slope downward.
d. They can both shift in response to changes in income or wealth.
e. Neither of them is influenced by the size of the population.
B
The law of supply states that the quantity supplied of a good and
a. the price of a key input are inversely related
b. its price are inversely related
c. the price of a key input are positively related
d. its price are positively related
e. the price of an alternate good are positively related
D
With other things constant, the supply schedule for a particular good indicates the quantities
a. actually sold with different productive capacities
b. supplied with different productive capacities
c. actually sold at various prices of the good
d. supplied at various prices of the good
e. supplied at various prices of the good and with various productive capacities
D
Which of the following statements is correct?
a. The demand curve typically slopes upward; the supply curve typically slopes downward.
b. The demand curve typically slopes downward; the supply curve typically slopes upward.
c. Both the demand and supply curves typically slope downward.
d. Both the demand and supply curve typically slope upward.
e. The demand curve is typically vertical; the supply curve is typically horizontal.
B
The law of supply says that
a. supply and income are inversely related
b. supply follows demand
c. quantity supplied equals quantity demanded
d. price and quantity supplied are inversely related
e. price and quantity supplied are directly related
E
"Supply curves are upward sloping" is a graphical way of saying
a. supply equals demand
b. price and quantity supplied are inversely related
c. price and quantity demanded are directly related
d. price and quantity supplied are directly related
e. price and quantity demanded are inversely related
D
An increase in the price of a particular good, with all other variables constant, causes
a. a movement along a given supply curve to a lower quantity supplied
b. a shift to a different supply curve with lower quantities supplied
c. a movement along a given supply curve to a higher quantity supplied
d. a shift to a different supply curve with higher quantities supplied
e. no movement along a given supply curve unless demand also changes
C
Which of the following is assumed constant along a given supply curve for pistachio ice cream?
a. the price of pistachios and the price of pistachio ice cream
b. the price of pistachio ice cream and the price of alternate flavors of ice cream
c. the prices of alternate goods, but not the prices of inputs
d. all variables affecting supply other than the productive capacity of the industry
e. all variables affecting supply other than the price of pistachio ice cream
E
Holding everything else constant, as the price of natural gas rises, selling natural gas becomes
a. more profitable, and the quantity supplied falls
b. less profitable, and the quantity supplied rises
c. less profitable, and the quantity supplied falls
d. more profitable, and the quantity supplied rises
e. more profitable, but the quantity supplied does not change
D
Procter & Gamble Co. is a major soap producer. All of the following, except one, would shift its supply curve of liquid soap to le
a. an increase in the price of bar soap
b. an increase in the price of a key ingredient of liquid soap
c. environmental regulations force Procter & Gamble to use a more costly technology to produce liquid soap
d. a decrease in the price of liquid soap
e. an increase in the wage rate for factory workers who produce liquid soap
D
Which of the following would not lead to a change in the supply of chocolate ice cream?
a. a change in productive capacity
b. a change in the price of strawberry ice cream
c. a change in the price of milk
d. a change in the price of chocolate ice cream
e. a change in the expected future price of chocolate ice cream
D
An increase in quantity supplied can be caused by a(n)
a. decrease in quantity demanded
b. rise in resource input prices
c. increase in price
d. decrease in the number of firms in the market
e. tax levied on the producer
C
A decrease in the price of a commodity results in a(n)
a. decrease in supply
b. decrease in quantity demanded
c. increase in demand
d. decrease in quantity supplied
D
If a supply curve shifts rightward along a downward sloping demand curve
a. the quantity supplied will increase
b. the quantity supplied will decrease
c. it makes no sense to talk about a change in quantity supplied
d. the quantity demanded will decrease
e. the price will increase
A
If sellers decide to sell more calculators by mass producing them and lowering the price so consumers will buy more, the suppl
a. True
b. False
B (??)
Which of the following would cause a leftward shift of the supply curve for computers?
a. an increase in the price of printed circuit boards used to build computers
b. a decrease in the price of electricity
c. an increase in incomes of consumers
d. a decrease in the price of computers
e. a decrease in the size of the population
A
If steel manufacturers expected that the price of steel was going to rise in the next six months, this would
a. have no change in the competitive market for steel
b. lead to a decreased demand for steel
c. lead to a decreased supply of steel
d. increase the future demand for automobiles
e. lead to a decrease in the quantity of steel supplied to the market
C
Studies show that the supply curve for bananas has shifted. All of the following could be possible explanations for the shift, exc
a. The price of land for growing bananas has risen.
b. Weather conditions in banana-growing countries have worsened.
c. The price of apples has fallen.
d. The price of bananas has risen.
e. The salaries paid to banana growers has risen.
D
Which of the following would lead to a change in both the quantity of a good buyers wish to purchase and in the quantity selle
a. a change in the price of a substitute good
b. a change in buyers' incomes
c. a change in the price of a key input
d. a technological improvement
e. a change in the expected future price of the good
E
If the price of new automobiles rises in the U.S. market while prices remain unchanged in foreign markets,
a. foreign firms will want to export fewer automobiles to the United States
b. foreign firms will want to export more automobiles to the United States
c. foreign firms will not change their exports to the United States since it is a different market
d. U.S. firms will want to export more automobiles to foreign markets
e. U.S. firms will not change their exports to foreign markets unless foreign prices also change
B
Which of the following would shift the entire supply curve for electricity to the left?
a. a decrease in the price per unit of electricity
b. a decrease in the price of coal used to generate electricity
c. new EPA regulations that force the closing of the worst polluting coal-burning power plants
d. a decrease in the price of alternative forms of energy
e. a technological improvement that reduces the cost of producing electricity
C
If the same dairy can produce either whole milk or skim milk, an increase in the profitability of whole milk results in a(n)
a. decrease in the quantity supplied of whole milk
b. increase in the supply of whole milk
c. decrease in the supply of skim milk
d. increase in the supply of skim milk
e. decrease in the quantity supplied of skim milk
C
If the resource prices faced by a firm rise, the result is a(n)
a. decrease in supply
b. increase in supply
c. decrease in demand
d. increase in quantity demanded
e. decrease in quantity supplied
A
An increase in supply could be caused by a(n)
a. increase in price
b. government-imposed price ceiling
c. decrease in resource prices
d. decrease in consumer incomes
e. unfavorable shift in tastes and preferences
C
If an improvement in production technology causes a decrease in production costs, the result is a(n)
a. decrease in quantity supplied
c. increase in supply
d. improvement is working conditions
e. increase in quantity supplied
C
When a market is in equilibrium,
a. quantity demanded equals quantity supplied
b. quantity demanded exceeds quantity supplied
c. the demand curve is identical to the supply curve
d. the economy must be at a point along the production possibilities frontier
e. the law of demand is equivalent to the law of supply
A
In a competitive market, when price is below the equilibrium level, the price will be driven upward due to
a. excess supply
b. government intervention
c. competition among suppliers
d. excess demand
e. technical inefficiency
D
The equilibrium price and quantity of a good, once attained, will
a. change only if either supply or demand changes
b. change only if both supply and demand change
c. change only if supply changes
d. change only if demand changes
e. never change
A
In a competitive market, excess demand for a good exists whenever
a. the current price is below the equilibrium price
b. resources are scarce
c. the quantity supplied at the current price exceeds the quantity demanded
d. sellers are subject to the constraints imposed by input prices and technology
e. the current price is above the equilibrium price
A
An excess supply of rice in a competitive market would indicate that
a. the problem of scarcity has been solved in that market
b. buyers want to purchase more rice at the current price than the sellers want to sell
c. the market will not be able to approach equilibrium
d. the entire supply curve must shift to the left in order to attain equilibrium
e. the current price exceeds the equilibrium price
E
The supply and demand model
a. tries to include as many realistic details as possible in order to provide insights into real-world competitive markets
b. uses simplifying assumptions while still providing insights into real-world competitive markets
c. uses simplifying assumptions that severely limit its usefulness in practice
d. is too complicated to be useful in practice
e. is unable to explain price movements in most real-world competitive markets
B
Market equilibrium occurs at that price for which
a. quantity supplied equals quantity demanded
b. cost equals the wages to labor
c. the surplus quantity drives increased demand
d. quantity supplied exceeds quantity demanded
e. quantity supplied is less than quantity demanded
A
At the market equilibrium
a. quantity exceeds price
b. excess demand equals excess supply (and both are zero)
c. price and quantity are equal
d. each seller produces at full capacity
e. everyone who is represented along the demand curve buys the good
B
Excess demand occurs when
a. the actual price is greater than the equilibrium price
b. equilibrium is undefined
c. consumer wants are unlimited
d. the actual price is less than the equilibrium price
e. the market is in equilibrium
D
If the price of film increases, the demand for film processing would decrease; moreover, the equilibrium price and quantity of fi
a. True
b. False
A
If prices are free to rise and fall, and supply and demand cross at a positive price, quantity combination, neither excess demand
a. True
b. False
A
If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchang
a. True
b. False
A
Which of the following could lead to an increase in the equilibrium quantity of a good?
a. a decrease in supply and a decrease in demand
b. an increase in the price of an input
c. an increase in demand and an increase in supply
d. a decrease in demand regardless of supply
e. a decrease in technology
C
If the demand for baseball cards rises and the supply curve does not shift, then the price
a. will rise and quantity will fall
b. and quantity will rise
c. will fall and quantity will rise
d. and quantity will fall
e. will rise, but quantity may rise or fall
B
If the supply of coffee falls due to bad weather conditions in coffee-exporting countries, then the
a. price and quantity will rise
b. price and quantity will fall
c. price will fall and quantity will rise
d. price will rise and quantity will fall
e. quantity will fall, but price may rise or fall
D
If the market for a good is initially in equilibrium and there is a rightward shift of the demand curve, then
a. the equilibrium price will fall
b. there will be a rightward movement along the supply curve
c. the supply curve will also shift to the right
d. the supply curve will shift to the left
e. the demand curve will shift back as consumers react to the higher equilibrium price
B
Suppose that today the market for lima beans is in equilibrium. Tomorrow both the supply and demand curves for lima beans w
a. will fall; fall
b. will fall; rise
c. will rise; fall
d. cannot be determined; fall
e. cannot be determined; rise
D
If there is an increase in the demand for automobiles, and at the same time auto workers receive a substantial raise, what will
a. Price and quantity will rise.
b. Price and quantity will fall.
c. Price will rise; quantity will fall.
d. Quantity will rise; price change cannot be determined.
e. Price will rise; quantity change cannot be determined.
E
Assuming the most typical shapes of the demand and supply curves, which of the following could lead to an increase in the cur
a. a decrease is the price of computer chips
b. a decrease in buyers' incomes, assuming that computers are a normal good
c. a technological improvement that reduces manufacturing costs
d. expectations of a higher future price
e. an increase in the price of computer software
D
Assume the typical shapes of the demand and supply curves. If both demand and supply increase in a competitive market, the
a. always rise
b. always fall
c. rise if demand increases more than supply increases
d. fall if demand increases more than supply increases
e. remain unchanged
C
Assume the most typical shapes for the demand and supply in a competitive market. Suppose that demand falls and supply inc
a. The equilibrium price will fall; the equilibrium quantity may rise or fall.
b. The equilibrium price will rise; the equilibrium quantity may rise or fall.
c. The equilibrium quantity will fall; the equilibrium price may rise or fall.
d. The equilibrium quantity will rise; the equilibrium price may rise or fall.
e. The equilibrium price will fall; the equilibrium quantity will not change.
A
Consider the competitive market for oil. Which of the following would result from the discovery of new oil fields that can be pr
a. both b and d
b. an increase in the demand for oil
c. an excess demand for oil as oil companies shift resources to developing the new fields
d. an excess supply of oil if the price of oil fails to drop sufficiently
e. an increase in the expected future price of oil
D
Economists view shifts of supply and demand as
a. unusual events that call for government intervention
b. unusual events resulting from the failure of the price to fall
c. normal and frequent events
d. normal and frequents events that do not affect equilibrium prices
e. normal and frequent events that result from government intervention
C
Oil and Natural Gas can each be used as a source of energy and are, for many purposes interchangable. Which of the following
a. Increased oil prices raised demand for natural gas, a substitute good.
b. Increased oil prices raised the quantity demanded of natural gas by movement along the natural gas demand curve.
c. Increased oil prices reduced supply of natural gas, a substitute good.
d. Increased oil prices reduced supply of natural gas, an alternate good.
e. Increased oil prices raised supply of natural gas, a substitute good.
A
If the supply curve does not shift, an increase in demand results in a(n)
a. increase in equilibrium price and a decrease in equilibrium quantity
b. decrease in equilibrium price and a decrease in equilibrium quantity
c. increase in equilibrium price and an increase in equilibrium quantity
d. decrease in equilibrium price and an increase in equilibrium quantity
C
An increase in both equilibrium price and quantity could be produced by a(n)
a. decrease in supply, with demand constant
b. increase in supply, with demand constant
c. decrease in demand, with supply constant
d. increase in demand, with supply constant
e. rise in resource prices
D
A decrease in demand, with supply constant, results in a(n)
c. increase in equilibrium price and an increase in equilibrium quantity
d. increase in equilibrium price and an ambiguous effect on equilibrium quantity
e. decrease in supply
B
A decrease in both equilibrium price and quantity could be produced by a(n)
a. decrease in supply, with demand constant
b. increase in supply, with demand constant
c. decrease in demand, with supply constant
d. increase in demand, with supply constant
e. improvement in technology
C
An increase in supply results in a(n)
a. increase in demand
b. decrease in equilibrium quantity and an increase in equilibrium price
c. decrease in equilibrium quantity and a decrease in equilibrium price
d. decrease in equilibrium price and an increase in equilibrium quantity
e. unfavorable shift in tastes and preferences
D
A decrease in equilibrium price and an increase in equilibrium quantity could be brought about by a(n)
a. increase in demand
b. decrease in demand
c. increase in resource prices
d. improvement in production technology
e. favorable shift in tastes and preferences
D
A decrease in supply results in a(n)
a. decrease in demand
b. increase in equilibrium quantity and a decrease in equilibrium price
c. decrease in equilibrium quantity and a decrease in equilibrium price
d. increase in demand
e. increase in equilibrium price and a decrease in equilibrium quantity
E
An increase in equilibrium price and a decrease in equilibrium quantity could be caused by a(n)
a. increase in resource prices
c. increase in supply
d. favorable shift in tastes and preferences
e. improvement in production technology
A
An increase in demand coupled with an increase in supply results in a(n)
a. increase in price and an ambiguous effect on equilibrium quantity
c. decrease in equilibrium quantity and an ambiguous effect on equilibrium price
d. increase in economic rent
e. ambiguous effect on equilibrium price and an increase in equilibrium quantity
E
An increase in demand coupled with a decrease in supply results in a(n)
a. increase in equilibrium price and an ambiguous effect on equilibrium quantity
c. decrease in equilibrium quantity and an ambiguous effect on equilibrium price
d. surplus
e. decrease in the equilibrium price and quantity
A
A decrease in demand coupled with a decrease in supply results in a(n)
c. increase in equilibrium price and a increase in equilibrium quantity
d. ambiguous effect of equilibrium price and a decrease in equilibrium quantity
e. ambiguous effect on equilibrium price and a increase in equilibrium quantity
D
A decrease in demand and an increase in supply results in a(n)
a. decrease in equilibrium price and an ambiguous effect on equilibrium quantity
b. increase in equilibrium price and an ambiguous effect on equilibrium quantity
c. ambiguous effect on equilibrium price and an increase in equilibrium quantity
d. ambiguous effect on equilibrium price and an decrease in equilibrium quantity
e. increase in equilibrium price and a decrease in equilibrium quantity
A
An increase in demand causes
a. a surplus
b. excess supply
c. an increase in supply
d. an increase in equilibrium price and equilibrium quantity
e. an improvement in technology
D
Defining a market involves deciding how to view
a. equilibrium supply and demand
b. normative economic analysis
c. the thing being traded, the decision makers, and the trading environment
d. suppliers, demanders, shortages, and surpluses
e. excess demand and excess supply
C
Characterizing a market involves
a. counting the number of demanders and measuring their quantity demanded
b. counting the number of suppliers and measuring their costs
c. equating the number of suppliers and the number of demanders
d. deciding which market best suits the problem being analyzed
e. deciding how to increase the degree of competition
D
One of the three Key Steps of economic analysis is
a. describing the conditions necessary for equilibrium and a method for determining that equilibrium
b. determining who are the suppliers and a method for counting the number of suppliers
c. determining who are the demanders and a method for counting the number of demanders
d. pairing up each demander with a particular supplier
e. pairing up each suppliers with a particular demander
A
The three-step procedure for economic analysis
a. works better in macroeconomics than in microeconomics
b. begins with characterizing the market
c. helps governments decide how to change the market equilibrium
d. focuses on goals and constraints
e. is used only in microeconomics
B
Evan left a job in which he was earning $75,000 a year for one he liked better but pays only $50,000 a year. Around the same ti
a. used cars are normal goods for Evan
b. new cars are inferior goods for Evan
c. the supply curve for new cars shifted to the left
d. new and used cars are complements
e. used cars are inferior goods for Evan
E
Given the demand curve for laptop computers, if the government began to encourage households to own a computer by provi
a. both the equilibrium price and quantity of laptops will increase
b. both the equilibrium price and quantity of laptops will decrease
c. the equilibrium price of laptops will increase but the equilibrium quantity will decrease
d. the equilibrium price of laptops will decrease but the equilibrium quantity will increase
e. subsidies to households have no effect on either the supply or demand
A
hift rightward.
odel is a normal good. Which is the exception?

here she now earns $30,000 per year. About the same time she received her first paycheck, her bicycle was stolen. With her old income she
mation and believe it will have no impact on price, the result is
ibrium quantity of leather shoes will decrease.
left. Which is the exception?
ply and demand curves will both shift to the right.
xcept one. Which is the exception?
lers wish to sell?

f film processing should also decrease.
nd nor excess supply can persist in a market.

s will shift to the left. As a result, the equilibrium price _____ and the equilibrium quantity will _____.
ll happen to equilibrium price and quantity in the automobile market?
urrent equilibrium price for personal computers?
he equilibrium price will
ncreases. Which of the following statements is correct?
profitably accessed at the current price?

ng best explains the increase in the price of natural gas that accompanied the increase in the price of oil during the 1990-1991 Persian Gulf
time as the job switch, Evan needed to buy a new car. Had he kept his old job he would have bought a new car but instead he was forced t
viding a subsidy to each family that buys one,
s stolen. With her old income she would have purchased a new bike but with her new income she purchased a new car. Therefore,
ring the 1990-1991 Persian Gulf War?
w car but instead he was forced to buy a used car. Therefore
ed a new car. Therefore,

A Both a competitive firm and a monopolist are price takers.
B Both a competitive firm and a monopolist are price makers.
C A competitive firm is a price taker, whereas a monopolist is a price maker.
D A competitive firm is a price maker, whereas a monopolist is a price taker.
C
A monopoly
A can set the price it charges for its output and earn unlimited profits.
B takes the market price as given and earns small but positive profits.
C can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
D can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.
C
The fundamental source of monopoly power is
A barriers to entry.
B profit.
C decreasing average total cost.
D a product without close substitutes.
A
The simplest way for a monopoly to arise is for a single firm to
A decrease its price below its competitors' prices.
B decrease production to increase demand for its product.
C make pricing decisions jointly with other firms.
D own a key resource.
D
Most markets are not monopolies in the real world because
A firms usually face downward-sloping demand curves.
B supply curves slope upward.
C price is usually set equal to marginal cost by firms.
D there are reasonable substitutes for most goods.
D
Patent and copyright laws are major sources of
A natural monopolies.
B government-created monopolies.
C resource monopolies.
D antitrust regulation.
B
Drug companies are allowed to be monopolists in the drugs they discover in order to
A allow drug companies to charge a price that is equal to their marginal cost.
B discourage new firms from entering the drug market.
C encourage research.
D allow the government to earn patent revenue.
C
Which of the following is a characteristic of a natural monopoly?
A Marginal cost declines over large regions of output.
B Average total cost declines over large regions of output.
C The product sold is a natural resource such as diamonds or water.
D All of the above are correct.
B
Additional firms often do not try to compete with a natural monopoly because
A they fear retaliation in the form of pricing wars from the natural monopolist.
B they are unsure of the size of the market in general.
C they know they cannot achieve the same low costs that the natural monopolist enjoys.
D the natural monopoly doesn't make a huge profit.
C
Economists assume that monopolists behave as
A cost minimizers.
B profit maximizers.
C price maximizers.
D maximizers of social welfare.
B
The supply curve for the monopolist
A is horizontal.
B is vertical.
C is upward sloping.
D does not exist.
D
Monopolies use their market power to
A charge prices that equal minimum average total cost.
B increase the quantity sold as they increase price.
C charge a price that is higher than marginal cost.
D dump excess supplies of their product on the market.
C
A The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist.
B The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizont
C The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward slopin
D The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist.
C
What is the shape of the monopolist's marginal revenue curve?
A a downward-sloping line that is identical to the demand curve
B a downward-sloping line that lies below the demand curve
C a horizontal line that is identical to the demand curve
D a horizontal line that lies below the demand curve
B
A profit-maximizing monopolist will produce the level of output at which
A average revenue is equal to average total cost.
B average revenue is equal to marginal cost.
C marginal revenue is equal to marginal cost.
D total revenue is equal to opportunity cost.
C
Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to
Union entre curva C y curva B
Refer to Figure 15-4. Profit will be maximized by charging a price equal to
El mayor P que este en Q ( union de curva c y b)
The deadweight loss associated with a monopoly occurs because the monopolist
A maximizes profits.
B produces an output level less than the socially optimal level.
C produces an output level greater than the socially optimal level.
D equates marginal revenue with marginal cost.
B
Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's e
A average revenue exceeds marginal cost.
B average revenue exceeds average total cost.
C marginal revenue exceeds marginal cost.
D marginal revenue exceeds average total cost.
A
The economic inefficiency of a monopolist can be measured by the
A number of consumers who are unable to purchase the product because of its high price.
B excess profit generated by monopoly firms.
C poor quality of service offered by monopoly firms.
D deadweight loss.
D
The socially efficient level of production occurs where the marginal cost curve intersects
A average variable cost.
B average total cost.
C demand.
D marginal revenue
C
A The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product
B The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quanti
C The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product.
D The primary social problem caused by monopoly is monopoly profit.
C
Refer to Figure 15-7. What is the monopoly price and quantity?
El mayor precio y mayor cantidad
Refer to Figure 15-7. What is the socially efficient price and quantity?
El precio y cantidad intermedia
Price discrimination is the business practice of
A bundling related products to increase total sales.
B selling the same good at different prices to different customers.
C pricing above marginal cost.
D hiring marketing experts to increase consumers' brand loyalty.
B
The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to
A sabotage.
B conspiracy.
C arbitrage.
D collusion.
C
Antitrust laws have economic benefits that outweigh the costs if they
A prevent mergers that would decrease competition and lower the costs of production.
B prevent mergers that would decrease competition and raise the costs of production.
C allow mergers that would decrease competition and raise the costs of production.
D None of the above is correct because antitrust laws never have economic benefits that outweigh the costs.
B
Splitting up a monopoly is often justified on the grounds that
A consumers prefer dealing with small firms.
B small firms have lower costs.
C competition is inherently efficient.
D nationalization is a less-preferred option.
C
If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm
A earn zero economic profits.
B earn positive economic profits, causing other firms to enter the industry.
C earn negative economic profits, causing the firm to exit the industry.
D minimize costs in order to lower the price that it charges.
A
A Public ownership is preferred to regulation in order to minimize the deadweight losses associated with natural monopolies.
B Antitrust laws are always the best way to limit monopoly power.
C It is possible that the best approach to monopolies is for the government to do nothing.
D Marginal-cost pricing requires a natural monopoly to earn zero economic profits.
C
A profit-maximizing monopolistically competitive firm will produce the level of output at which
A average revenue is equal to average total cost.
B average revenue is equal to marginal cost.
C marginal revenue is equal to marginal cost.
D total revenue is equal to opportunity cost
C
A monopolistically competitive market has characteristics that are similar to
A a monopoly only.
B a competitive firm only.
C both a monopoly and a competitive firm.
D neither a monopoly nor a competitive firm.
C
In a market that is characterized by imperfect competition,
A firms are price takers.
B there are always a large number of firms.
C there are at least a few firms that compete with one another.
D the actions of one firm in the market never have any impact on the other firms' profits.
C
Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of a(n)
(i)imperfectly competitive market.

(ii)monopoly market.
(iii)oligopoly market.
A (i) and (ii) only

B (ii) and (iii) only
C (i) and (iii) only
D (iii) only
C
Which of the following goods are likely to be sold in a monopolistically competitive market?
A sweaters
B cola
C corn
D postage stamps
A
Which of the following goods are not likely to be sold in monopolistically competitive markets?
A jeans
B books
C tap water
D clocks
C
When an industry has many firms, the industry is
A an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.
B an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
C monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical p
D perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical p
C
Each firm in a monopolistically competitive industry faces a downward-sloping demand curve because
A there are many other sellers in the market.
B there are very few other sellers in the market.
C the firm's product is different from those offered by other firms in the market.
D the firm faces the threat of entry into the market by new firms.
C
For a monopolistically competitive firm, at the profit-maximizing quantity of output,
A price exceeds marginal cost.
B marginal revenue exceeds marginal cost.
C marginal cost exceeds average revenue.
D price equals marginal revenue
C
In the short run, a firm in a monopolistically competitive market operates much like a
A firm in a perfectly competitive market.
B firm in an oligopoly.
C monopolist.
D monopsonist.
C
A monopolistically competitive firm chooses
A the quantity of output to produce, but the market determines price.
B the price, but competition in the market determines the quantity.
C price, but output is determined by a cartel production quota.
D the quantity of output to produce and the price at which it will sell its output.
D
A monopolistically competitive firm's choice of output level is virtually identical to the choice made by
A a perfectly competitive firm.
B a duopolist.
C a monopolist.
D an oligopolist.
C
When a market is monopolistically competitive, the typical firm in the market can earn
A losses in the short run and profits in the long run.
B profits in the short run and the long run.
C Profits and losses in the short run and zero economic profit in the long run.
D zero profit in the short run and losses in the long run
C
Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profi
A monopoly only
B monopoly and monopolistic competition only
C monopoly, monopolistic competition, and perfect competition
D The answer cannot be determined without knowing whether the market is in the long run or short run
B
Refer to Figure 16-8. In order to maximize its profit, the firm will choose to produce
el punto máximo que choca con el precio máximo
Under which of the following market structures would consumers likely pay the highest price for a product?
A perfect competition
B monopolistic competition
C oligopoly
D monopoly
D
When a firm operates with excess capacity,
A additional production would lower the average total cost.
B additional production would increase the average total cost.
C it must be a perfectly competitive firm.
D it must be a monopolistically competitive firm.
A
A business-stealing externality is
A an externality that is likely to be punished under antitrust laws.
B the negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.
C an externality that is considered to be an explicit cost of business in monopolistically competitive markets.
D the negative externality associated with entry of new firms in a monopolistically competitive market.
D
Some firms have an incentive to advertise because they sell a
A homogeneous product and charge a price equal to marginal cost.
B homogeneous product and charge a price above marginal cost.
C differentiated product and charge a price equal to marginal cost.
D differentiated product and charge a price above marginal cost
D
The relationship between advertising and product differentiation is
A positive; the more differentiated the product, the more a firm is likely to spend on advertising.
B negative; the more differentiated the product, the less a firm is likely to spend on advertising.
C zero; there is no relationship between product differentiation and advertising.
D irrelevant; firms with differentiated products do not need to advertise.
A
A Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run.
B Both perfectly competitive and monopolistically competitive firms are price takers.
C Both a monopolistically competitive industry and a monopoly are characterized by a very small number of (or one) firm(s).
D Firms can easily enter a perfectly competitive or monopolistically competitive industry.
D
A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost
A only when the market is a monopoly.
B only when the market is a monopoly or monopolistically competitive.
C only when the market is monopolistically competitive or perfectly competitive.
D when the market is perfectly competitive, monopolistically competitive, or monopolistic.
D
Refer to Figure 16-9. As the figure is drawn, the firm is in
Correct!
a short-run equilibrium but it is not in a long-run equilibrium.
A
Refer to Figure 16-9. In response to the situation represented by the figure, we would expect
A some of the firms that are currently in the market to exit.

B the demand for this firm's product to increase, assuming this firm does not exit.
C this firm's profit to move from its current value toward zero.
D All of the above are correct.
D
Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce
A 100 units of output.
B between 100 and 133.33 units of output.
C 133.33 units of output.
D 154.92 units of output
A
Refer to Figure 16-9. The firm's maximum profit is
A $-7,000.
B $-5,000.
C $-2,000.
D The firm's maximum profit cannot be determined from the figure.
C
In which of the following market structures can firms earn economic profits in the long run?
C monopoly
D Both b and c are correct.
C
Under which of the following market structures would consumers likely pay the highest price for a product?
C oligopoly
D monopoly
D
a firm tat is the sole seller of a product without close substitutes
monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two
natural monopoly
the business practice of selling the same good at different prices to different customers
price discrimination
the process of buying a good in one market at a low price and selling it in another market at a higher price
arbitrage
A situstion in which the monopolist is able o charge each customer precisely his or her willingness to pay
perfect price discrimination
t is horizontal.
nward sloping.
e society's economic welfare, output would need to be increased as long as
m's product.
uces a quantity of output that exceeds the socially-efficient quantity.
in order to profit from the price difference is known as

ost, the firm will
l identical products.
l identical products.
does a profit-maximizing firm charge a price that exceeds marginal cost?
could two or more firms

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Terms in this set (65)

Economic costs of an input include

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Terms in this set (157)

odel is a normal good. Which is the exception?

xcept one. Which is the exception?

lers wish to sell?

nd nor excess supply can persist in a market.

ll happen to equilibrium price and quantity in the automobile market?

urrent equilibrium price for personal computers?

he equilibrium price will

ncreases. Which of the following statements is correct?

profitably accessed at the current price?

Which of the following statements is correct?

(i)imperfectly competitive market.

A (i) and (ii) only

A some of the firms that are currently in the market to exit.

in order to profit from the price difference is known as

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