One Buyer
Which of the following is not a characteristic of a monopoly?
-One seller
-Barriers to entry
-A product without close substitutes
-One buyer
Diseconomies of scale
Which of the following is not a reason for the existence of a monopoly?
-Diseconomies of scale
-Patents
-Sole ownership of a key resource
-Copyrights
Reasonable substitutes for most goods
Why are most markets in the real world not monopolies?
-supply curves slow upward
-firms usually equate price with marginal cost
-there are reasonable substitutes for most goods
-firms usually face downward-sloping demand curves
there are economies of scale over the relevant range of output
A natural monopoly occurs when
-the firm is characterized by a rising marginal cost curve
-there are economies of scale over the relevant range of output
-production requires the use of free natural resources, such as water or air
-the product is sold in
marginal revenue is less than price
Because a monopolist must lower its price in order to sell another unit of output, ?
-marginal revenue is less than price
-long term economic profits will be zero
-total revenue increases as price increases
-average revenue is less than price
B 20
ECON TEST 3 question 11
D 120
Econ Test 3 question 12
Arbitrage
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 profit from the price difference is known as
-arbitrage
-conspiracy
-sabotage
-collusion
All of the above
If a monopolist can practice perfect price discrimination, the monopolist will
-eliminate deadweight loss
-maximize profits
-eliminate consumer surplus
-all of the above
Through regulation
In the majority of cases where there is a natural monopoly in the United States, the government usually deals with the problem
-by turning the natural monopoly into a public enterprise
-by doing nothing
-through regulation
-by splitting the natural monopo
Firms have difficulty entering the market
Which of the following is not a characteristic of a perfectly competitive market?
-there are many sellers in the market
-firms have difficulty entering the market
-goods offered for sale are largely the same
-firms are price takes
buyers will go elsewhere
When firms are said to be price takers, it implies that if a firm raises its price, ?
-buyers will go else
-competitors will also raise their prices
-firms in the industry will exercise market power
-buyers will pay the higher price in the short run
a hot dog vendor in New York
Which of the following firms is the closest to being a perfectly competitive firm?
-ford motor company
-a hot dog vendor in New York
-the campus bookstore
-Microsoft Corporation
C840
Econ Test 3 question 27
C 120
Econ Test 3 question 28
equal to marginal revenue
For a firm in a perfectly competitive market, the price of the good is always ?
-equal to the firm's efficient scale of output
-equal to total revenue
-greater than average revenue
-equal to marginal revenue
a one unit increase in output will increase the firm's profit
If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then ?
-total revenue exceeds total cost
-total cost exceeds total revenue
-a one unit decrease in output will increase the firms profit
-a one
marginal revenue equals marginal cost
At the profit maximizing level of output, ?
-marginal revenue equals marginal cost
-marginal revenue equals average variable cost
-average revenue equals average total cost
-marginal revenue equals average total cost
its average total cost is less than $10
If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then ?
-its average total cost is less than $10
-its marginal revenue is less than $10
-its total cost is more than $9,000
-the firm cannot
make more than 20 wedding cakes per month
Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $20
(price times quantity) minus (average total cost times quantity)
Total profit for a firm is calculated as
-(price times quantity) minus (average total cost times quantity)
-marginal revenue minus marginal cost
-marginal revenue minus average total cost
-average revenue minus average total cost
250
Suppose that a firm in a competitive market is currently maximizing its shot run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the fir
D 25,750
EXAM 3 question 37
-20375
-16500
-90125
-25750
D All of the above are correct
Exam #3 Question #38
new firms to enter the market, even without government subsidies
When existing firms in a competitive market are profitable, an incentive exists for ?
-new firms to enter the market, even without government subsidies
-existing firms to raise prices
-existing firms to increase production
-new firms to seek government su
decrease market supply and increase market price
The exit of existing firms from a competitive market will ?
-decrease market supply and decrease market price
-increase market supply and increase market price
-decrease market supply and increase market price
-increase market supply and decrease market p
some firms will exit from the market
Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit maximizing output level, then in the long run ?
-more firms will enter the market
-average total costs will fall
zero economic profits
In the long run, each firm in a competitive industry earns ?
-zero accounting profits
-positive economic profits
-positive, negative, or zero economic profits
-zero economic profits
have a zero economic profit
Exam #3 question #43
an eventual increase in the number of firms in the market and a new long run equilibrium at point Z
Exam #3 question #44
downward sloping demand curve
A monopolist faces a
-U shaped demand curve
-horizontal demand curve
-vertical demand curve
-downward sloping demand curve
a local electrical cooperative
Which of the following would be most likely to have monopoly power?
-an online bookstore
-a national florist
-a local restaurant
-a local electrical cooperative
Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not
Which of the following is not a difference between monopolies and perfectly competitive markets?
-monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost
-monopolies face downward sloping
both the output effect and the price effect work to increase total revenue
When a monopoly increases its output and sales, ?
-both the output effect and the price effect work to decrease total revenue
-the output effect works to increase total revenue, and the price effect works to decrease total revenue
-the output effect works
the price of bob's bison burgers will exceed bob's marginal cost
Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?
-the price of Bob's bison burgers will equal Bob's marginal cost
-the price of Bob's bis
B 7
Exam 3 #13
producing an output level where marginal revenue equals marginal cost
A monopolist maximizes profits by
-producing an output level where marginal revenue equals marginal cost
-charging a price equal to marginal revenue and marginal cost
-charging a price where marginal cost equals average total cost
-both a and b are correc
the monopolist will continue to earn an economic profit in the long run
Suppose that a monopoly is currently charging a price of $10 an dfaces an average total cost of $4. What will happen in the long run?
-firms will enter the market, driving both price and profit down
-the monopolist shuts down because he is incurring a los
produces an output level less than the socially optimal level
The deadweight loss associated with a monopoly occurs because the monopolist
-produces an output level less than the socially optimal level
-maximizes profits
-equates marginal revenue with marginal cost
-produces an output level greater than the socially
d J+H
Exam #3 Question # 17
An ice cream parlor charges a higher price for ice cream than for sherbet
Which of the following is not an example of price discrimination?
-a movie theater charges a lower price for a child's ticket than for an adult's ticket
-a local pizza chain offers a "buy three get one free" deal
-a university rebates part of the cost of
continue to operate in the short run but shut down in the long run
Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit maximizing level or production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should?
-shut down her business in
buyers' responsiveness to a change in the price of a good
The price elasticity of demand measures ?
-how much more of a good consumers will demand when income rise
-buyers responsiveness to a change in the price of a good
-the extent to which demand increases as additional buyers enter the market
-the movement a
demand for the good is said to be inelastic
If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the ?
-demand for the good is said to be elastic
-law of demand does not apply to the good
-demand curve for the good shifts only slightly in resp
greater than 1
Demand is elastic if the price elasticity of demand is?
-equal to 1
-greater than 1
-equal to 0
-less than 1
one year after the price increase
If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?
-one month after the price increase
-one year after the price increase
-three months after the price increase
-immediately after the price increases
demand for motor oil would tend to be inelastic
There are very few, if any, good substitutes for motor oil. Therefore, the ?
-demand for motor oil would tend to be elastic
-demand for motor oil would tend to respond strongly to canoes in prices of other goods
-demand for motor oil would tend to be inel
d. elastic, but not perfectly elastic
Exam #2 question #6
Steeper the demand curve will be
Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the ?
--closer to the vertical axis the demand curve will sit
-steeper the demand curve will be
-flatter the demand curve will b
A. A
Exam #2 Question #8
an inferior good
Suppose good X has a negative income elasticity of demand. This implies that good X is ?
-a necessity
-a luxury
-a normal good
-an inferior good
zero
Which of the following would be a good estimate of the cost price elasticity between tuna fish and gasoline?
-infinity
-12
-zero
--5
sellers are to change in price
The price elasticity of supply measurers how responsive ?
-equilibrium price is to a change in supply
-sellers are to a change in price
-buyers are to a change in production cost
-sellers are to a change in buyers income
supply is relatively elastic
When a supply curve is relatively flat, ?
-sellers are not very responsive to changes in price
-supply is relatively inelastic
-supply is relatively elastic
-both a and b are correct
a legal maximum on the price at which a good can be sold
A price ceiling is ?
-often imposed on markets in which
"cutthroat competition" would prevail without a price ceiling
-often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair witho
quantity demanded of physicals increase, and the quantity supplied of physicals decreases
Suppose the equilibrium price of a physical examination ("physical") by a actor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the ?
-demand curve for physicals shifts to the right
-supply curve
a smaller quantity of the good is bough and sold
Which of the following observations would be consistent with the imposition of a binding price floor on a market? After the price floor becomes effective, ?
-a larger quantity of the good is emended
-the price falls below the equilibrium price
-a smaller
A. a shortage of 30 units
Exam #2 question #17
the minimum wage
An example of a price floor is?
-any restriction on price that leads to a shortage
-the minimum wage
-the regulation of gasoline prices in the U.S. in the 1970s
-rent control
increases sellers' costs, reduces profits, an shifts the supply curve left
A tax levied on the sellers of blueberries ?
-increases sellers' costs, reduces profits, and shifts the supply curve left
-decreases sellers' costs, increases profits, and shifts the supply curve right
-decreases sellers' costs, increases profits, and shi
the distribution of the tax burden between buyers and sellers
The term tax incidence refers to ?
-the distribution of the tax burden between buyers and sellers
-the widespread view that taxes (and death) are the only certainties in life
-whether the demand curve or the supply curve shifts when the tax is imposed
-wh
D. $12.00
Exam #2 Question #21
D. $8.00
Exam #2 Question #22
$!4
Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then kelly's consumer surplus is
-14
-3.80
-52
-1.40
B. AFG
Exam #2 Question #25
seller's cost of production
A seller is willing to sell a product only if the seller receives a price that is at least as great as the ?
-average willingness to pay of buyers of the product
-seller's profit
-seller's cost of production
-seller's producer surplus
the amount a seller is paid minus the cost of production
Producer surplus is ?
-always a negative number for sellers in a competitive market
-the opportunity cost of production minus the cost of producing goods that go unsold
-measured using he demand curve for a good
-the amount a seller is paid minus the cost
D. 150
Exam #2 Question #28
C. 250
Exam #2 Question #29
Profits
Economists assume that the goal of the firm is to maximize total ?
-satisfaction
-profits
-costs
-revenue
C and D
(This question can be multiple answers)
Frank owns a dog grooming business. Which of the following costs would be implicit costs?
-dog shampoo
-rent on the storefront
-wages Frank could earn as a substitute elementary school teacher
-interest that Frank's
0
Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in
Increase in total output obtained from one additional unit of that input
The marginal product of any input is that ?
-increase in total output obtained from one additional unit of that input
-increase in total cost resulting from the hiring of an additional worker
-change in total output associated with a $1.00 increase in tot
A. Decreasing Marginal product
Exam #2 Question #34
Variable Cost
If a firms produces nothing, which of the following costs will be zero?
-opportunity cost
-fixed cost
- variable cost
-total cost
cost of a typical unit of output if total cost is divided evenly over all the units produced
Average total cost tells us the ?
-cost of the last unit of output, if total cost does not include a fixed oat component
-cost of a typical unit of output, if total cost is divided evenly over all the units produced
-total cost of the first unit of output
110
Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal ?
-100
-110
-90
-80
B. 270
Exam #2 Question #39
marginal cost
The amount by which total cost rises when the firm produces one additional unit of output is called ?
-fixed cost
-marginal cost
-variable cost
-average cost
diminishing marginal product
The fundamental reason that marginal cost eventually rises as output increases is because of ?
-diminishing marginal product
-rising average fixed cost
-economies of scale
-diseconomies of scale
Economies of scale
Suppose that a firm's long run average total costs of producing televisions decreases as it produces between 10000 and 20000 televisions. For the range of output, the firm is experiencing ?
-diseconomies of scale
-constant returns to scale
-economies of s
C. Constant returns to scale
Exam #2 Question #44
All of the above are correct
Which of the following products would be considered scarce?
-bread
-baseballs autographed by Babe Ruth
-motorcycles
-all of the above are correct
unlimited wants and limited resources
Economics is the study of how society manages its ?
-limited wants and unlimited resources
-unlimited wants and unlimited resources
-limited wants and limited resources
-unlimited wants and limited resources
people face tradeoffs
While pollution regulations yield the benefit of a cleaner environment and the improved health that dome with it, the regulations come at the cost of reducing the incomes of the regulated firms; owners, workers, and customers. The statement illustrates th
minimum waste
Which of the following phrases best captures the notion of efficiency?
-absolute fairness
-equal distribution
-minimum waste
-equitable outcome
all of the above are correct
A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies ?
-enhance equality
-reduce efficiency
-reduce the reward for working hard
-all of the above are correct
the enjoyment she would have received had she gone the park
Melody decided to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is ?
-the $60 she earns working
_the $60 minus the enjoyment she would have rece
the wages given up to attend school
For most students, the largest single cost of a college education is ?
-the wages given up to attend school
-tuition, fees, and books
-room and board
-transportation, parking, and entertainment
a famous, highly-paid actor who wants to take time way from show business to finish college and earn a degree
For which of the following individuals would the opportunity cost of going to college to be highest?
-a promising young mathematician who will command a high salary once she earns her college degree
-a student with average grades who has never held a job
small, incremental adjustment
A marginal change is a ?
-change that involves little, if anything, that is important
-large, significant adjustment
-change for the worse, and so it is usually a short-term change
-small, incremental adjustment
benefit of leaving was greater than the marginal benefit
Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal ?
-cost of leaving was greater than the marginal benefit
-benefit of leaving was greater than the marg
both Sam and Annie are made better off by trade
Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some Annie's bread and pastries, ?
-only Sam is made better off by trade
-only Annie is made better off by trade
-both Sam and Annie are made better off b
allows specialization, which reduces costs
Trade ?
-allows specialization, which increases costs
-allows specialization, which reduces costs
-reduces specialization, which increases costs
-reduces specialization, which reduces costs
are more efficient
One advantage market economies have over centrally-planned economies is that market economies
-provide an equal distribution of goods and services to households
-establish a significant role for government in the allocation of resources
-solve the problem
individuals' pursuit of self-interest
According to Adam Smith, the success of decentralized market economies is primarily due to ?
-the basic benevolence of society
-society's legal system
-individual's pursuit of self-interest
-partnerships that are forged between business and government
both the value of a good and to society and the cost of making it
A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect ?
-the value of a good to society, but n
both externalities and market power
For which of the following problems can well-designed public policy enhance economic efficiency?
-both externalities and market power
-externalities, but not market power
-market failure caused by equality
-neither externalities nor market power
a market failure caused by an externality
Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of ?
-a market failure cause by an externally
-a market failure cause by market power
-a market failure cause by equality
-there is no market failure
a market failure caused by market power
The price of diamonds is high, in part because the majority of the world's diamond are controlled by a single firm. This is an example of ?
-a market failure caused by an externality
-a market failure caused by market power
-a market failure caused by equ
Collect and analyze data
Suppose an economist develops a theory that higher food prices arise from higher gas prices. According to the scientific method, which of the following is the economist's next step?
-collect and analyze data
-go to a laboratory and generate data to test t
good idea, since doing so helps to simplify the complex world and make it easier to understand
For an economist, the idea of making assumptions is regarded generally as a ?
-bad idea, since doing so leads to the omissions of important ideas and variables from economic models
-bad idea, since doing so invariably leads to data-colleciton problems
-go
own the factors of production
In the simple circular-flow diagram, households ?
-are the only decision makers
-own the factors of production
-are buyers of inputs
-consume only some of the goods and services that firms produce
a woman buys corn for dinner
Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?
-a landowner leases land to a farmer
-a farmer hires a teenager to help with harvest
-a construction company rents trucks for it
the available production technology
The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of producing and ?
-society's preferences
-the available production technology
-a fair distribu
increases as more of the good is produced
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good ?
-increases as more of the good is pro ducted
-decrease as more of the good is produced
-does not change as more of the good is prod
all of the above are correct
Suppose an economy only produces two goods, robots and ice cream. Last month, the economy produced 10 robots and 200 gallons of ice cream. This month, the same economy produced 15 robots and 240 gallons of ice cream. Which of the following statements coul
D. The opportunity cost of an additional 200 shoes increases as more socks are produced
Exam #1 Question #26
D. U
Exam #1 Question #27
C. R, U
Exam #1 Question #28
the effect of a sales tax on the cigarette industry
Which of the following would likely be studied by a macroeconomist rather than a macroeconomist?
-the effect of foreign direct investment uneconomic growth
-the effect of a sales tax on the cigarette industry
-the effect of an investment tax credit on the
positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be
One way to characterize the difference between positive statements and normative statements is as follows: ?
-positive statements tend to reflect optimism about the economy and its future
-positive statements offer descriptions of the way things are, wher
Shawn has an absolute advantage in the production of donuts
If Shawn can produce more donuts in one day than Sue can produce in one day, then ?
-Shawn has a comparative advantage in the production of donuts
-Sue has a comparative advantage in the production of donuts
-Shawn has an absolute advantage in the product
all of the above are correct
Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two con tries specialize and trade so as to maximize the benefits of
B. radios and Norway has a comparative advantage in the production of coolers
Exam #1 Question #33
B. radios and Norway should specialize in the production of coolers
Exam #1 Question #34
Falls, the quantity demanded of the good rises
The law of demand states that, other things equal, when the price of a good ?
-falls, the demand for the good rises
-rises, the quantity demanded of the good rises
-rises, the demand for thee good falls
-falls, the quantity demanded of the good rises
normal goods
Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are ?
-inferior goods
-normal goods
-perfectly competitive goods
-durable goods
an increase in consumer income, assuming gasoline is a normal good
Which of the following would shift the demand curve for gasoline to the right?
-a decrease in the price of gasoline
-an increase in consumer income, assuming gasoline is a normal good
-an increase in the price of cars, a complement for gasoline
-a decreas
decrease the number of skis sold
Holding all other things constant, a higher price for ski lift tickets would ?
-increase the number of skiers
-increase the price of skis
-decrease the number of skis sold
-decrease the demand for other winter recreational activities
increases today
You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter ?
-will i
When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup
Which of the following demonstrates the law of supply?
-When leather became more expensive, belt producers decreased their supply of belts
-when car production technology improved, car producers increased their supply of cars
-when sweater producers expec
rightward shift of a supply curve
An increase in supply is represented by a ?
-movement downward and to the left along a supply curve
-movement upward and to the right along a supply curve
-rightward shift of a supply curve
-leftward shift of a supply curve
market supply curve
Suppose there are six bit and tackle shops that sell worms i a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per bucket,
Supply of bicycles will shift to the left
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the ?
-demand for bicycles assembly workers will increase
-supply of bicycles wil
number of producers of gasoline
An increase in which of the following would shift the supply curve for gasoline to the right?
-demand for gasoline
-price of gasoline
-number of producers of gasoline
-price of oil, an input into the production of gasoline
exactly equals the quantity that sellers are willing and able to sell
At the equilibrium price, the quantity of the good that buyers are willing and able to buy ?
-is greater than the quantity that sellers are willing and able to see
-exactly equals the quantity that sellers are willing and able to see
-is less than the qua
to decrease and equilibrium quantity to increase
If the supply of a product increase, then we would expect equilibrium price ?
-to increase and equilibrium quantity to decrease
-to decrease and equilibrium quantity to increase
-and equilibrium quantity to both increase
-and equilibrium quantity to both
surplus to exist and the market price of roses to decrease
Suppose rose are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen.
-shortage to exist and the market price of roses to increase
-shortage to exist and the market price of roads to decrease
-surplus to exist and the
the ticket price is below the equilibrium price
A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates ?
-the ticket price is above the equilibrium price
-the ticket price is below the equilibrium price
-the ticket price is at the
decrease in the demand for sugar and a decrease in the quantity supplied of sugar
Suppose buyers of coffee an sugar regard the two goods as complements. Then an increase in the price of coffee will cause an ?
-decrease in the demand for sugar and a decrease in the quantity supplied of sugar
-decrease in the supply of sugar and a decrea
individual consumers, concerned about their own health, decreased their demand for beef, which lowered the equilibrium price of beef, making it less attractive to produce
During the last few deadens in the United States, health officials have argues that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best expla
B. Panel (b)
Exam #1 Question #54
D. Panel (d)
Exam #1 Question #55