Microeconomics can best be defined as the study ofa) the behavior of small firms in the marketplaceb) the economic behavior of individual decision makersc) the behavior of the economy as a wholed) how to use the fewest natural resources to produce goods and services
Which of the following is an example of a positive statement?a) Workers with families should be paid at least minimum wages.b) If crime rates were reduced, the world would be a better place in which to live.c) Marginal tax rates should be reduced for individuals in the highest tax brackets.d) An increase in the price of gasoline will cause a reduction in the amount purchased.
The higher the opportunity cost of attending collegea. the more likely an individual will go to college.b. the more economics classes an individual will take at college.c. the fewer economics classes an individual will take at college.
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d. the less likely an individual will go to college.
A production possibilities frontier is bowed out from the origin becausea.
of scarcity.b. opportunity costs are constant as a country moves along its production possibilities frontier.c.
wants are insatiable.d. in general resources are not perfect substitutes.
In a pure capitalist economy, what to produce is primarily decided bya. the government.
b. producers.c. consumers.d. what resources are available.
Which of the following is true about the sole proprietorship in the United States?a) It is the most prevalent form of business organization.b) It is responsible for the largest portion of business sales.
c) It offers the owner the least personal liability of any form of business organization.d) There is no opportunity cost to operating the business.
The main source of revenue for the U.S. federal government isa. personal income taxesb.
corporate income taxesc. sales taxesd. borrowing on financial markets
If the quantity demanded of a good exceeds the quantity supplied thena. the market price will fall.b. the market is in equilibrium.c. the market price will rise.
d. none of the above are true.
Assume the market for the inferior good X is in equilibrium. A simultaneous decrease in consumer incomes and the number of firms producing good X would definitelya. increase the equilibrium quantity of good X.b. decrease both the equilibrium price and quantity.
c. increase the equilibrium price but decrease equilibrium quantity.d.
increase the equilibrium price.
Assume that beef is $2.50 per pound and that pork is $3.00 per pound. If an increase in the supply of beef causes its price to fall to $2.00 per pound then a. the quantity supplied of pork will increase. b.
the demand for pork will decrease. c. the equilibrium quantity of beef will decrease. d.
the equilibrium price of pork will increase.
Assume that over the period 1981 to 1984 bicycle prices rose 25% and the quantity sold more than doubled. Which of the following statements can explain this event?a.
The price increase shifted the supply curve rightward.b. Demand remained unchanged and supply increased during the 1981 to 1984 period.c. Supply increased and demand decreased during the 1981 to 1984 period.d. Supply remained unchanged and demand increased during the 1981 to 1984 period.
If refinery workers receive an increase in their hourly wage, ceteris paribus, then one should expecta.
a decrease in the supply of refined petroleum products.b. an increase in the quantity supplied of refined petroleum products.c. a rightward shift of the supply curve of refined petroleum products.d.
an increase in the quantity demanded of refined petroleum products.
Suppose the equilibrium price for bread is $0.80 a loaf. If the government imposes a price ceiling of $1.20,a. a shortage will occur as the quantity sold falls.
b. the market will remain in equilibrium as the quantity sold will remain the same.c. a surplus will occur as the quantity sold falls.
d. the effect cannot be determined without knowledge of the original quantity sold.
The price elasticity of supply a. is greater in the long run than in the short run. b.
is negative in the short run but positive in the long run. c. is always zero in the long run and positive in the short run.
d. is greater in the short run than in the long run .
Assume that the price of good X rises from $10 to $12 and as a result quantity demanded falls from 24 to 22 units. The price elasticity of demand isa. -.416b. -.545c.
The more rapidly the costs of production rise as output is expandeda. the more price elastic is supply.b. the more price inelastic is demand.c.
the smaller is the price elasticity of supply.d. the more price elastic is demand.
If supply is perfectly price elastic, the supply curve isa. verticalb. horizontalc. any straightline supply curved. any supply curve intersecting a perfectly elastic demand curve
When the demand for a good is perfectly price inelastica. the price of the good will rise by the full amount of any sales tax placed on the good.b. the consumer and producer will share the incidence of the sales tax placed on the good.
c. the producer will bear the full burden of any sales tax placed on the good.d. the consumer and producer will share equally the incidence of any sales tax placed on the good.
The transportation authority of a major city decided to lower fares on buses from $1 to 75. As a result ridership increased from 10,000 per week to 16,000 per week. It can be concluded thata. the demand for bus rides is price elastic.
b. the magnitude of the price elasticity of demand is less than one.c. the demand for bus rides is price inelastic.
d. the price elasticity of demand is equal to minus one.
If total utility is at a maximum then marginal utility must bea. zero.b.
negative.c. positive.d. any of the above depending upon the individual’s preferences.
If the price good X falls, then the resulting increase in the amount consumed will a. reduce the marginal utility of the good but leave total utility unchanged.b.
increase the total utility from consumption of the good.c. always reduces the total utility derived from the good.d. increase the marginal utility of the good.
In the long runa. all of the firm’s resources are variable.
b. some, but not all, of the firm’s resources are variable.c. none of the firm’s resources are variable.
d. the time period always exceeds one year.
Assume that in the short run a firm is producing 100 units of output. At this level of output average variable cost is $50 and average fixed cost is $20. The firm’s total cost isa.
$70.b. $3000.c. $2000.d. $7000.
Economic profit is defined asa) total revenue plus total costsb) total revenue minus the opportunity cost of production.c) total revenue minus variable costsd) total revenue minus explicit costs.
If average total cost is risinga. average variable cost must be greater than average total cost.
b. marginal cost must be greater than average total cost.c. marginal costs must be falling.
d. all of the above must be true.
An increase in market demand will result in a perfectly competitive firma.
receiving a lower price for its product and producing less output.b. lowering the price of its product to maintain its share of the market.
c. producing more output and receiving a higher price for its output.d. doing none of the above.
A perfectly competitive firm’s short run supply curve isa. also its marginal revenue curve.b. its marginal cost curve above the minimum point of the average variable cost curve.
c. the firm’s average revenue curve.d. the same as its average total cost curve.
Assume a perfectly competitive constant cost industry is in long run equilibrium. Now assume an increase in demand occurs. In the long runa.
the new equilibrium price and output will be greater but the number of firms in the industry will be smaller.b. the new equilibrium price will be less but the number of firms in the industry and output will be the same.
c. the new equilibrium price will be the same but the number of firms and industrial output will be greater.d. the new equilibrium price and the number of firms will be less but industrial output will be greater.
If marginal cost equals marginal revenue at a point greater than average total cost, the perfectly competitive firm willa. sustain a economic loss.
b. make a positive economic profit.c. expand production.
d. decrease production.
In the long run a monopolista. can earn a positive level of economic profit as long as there are barriers to entry .
b. must earn zero economic profit.c. is likely to incur economic losses.d. will always earn the same level of economic profits as a perfectly competitive firm.
For a monopolist, marginal revenue is less than price becausea. the demand curve the monopolist faces is downward sloping.
b. the monopolist lowers the price on the marginal unit only.c. the demand curve the monopolist faces is perfectly price elastic.d. the market supply curve is upward sloping.
determines the profit maximizing level of output by equating marginal revenue and marginal cost and then charges whatever price the firm wishes to for that output.b. always makes a positive economic profit in the short run.c. can increase product price and output simultaneously.
d. is constrained by the market demand curve in setting the price of its output.
The demand curve a monopolist facesa) is more elastic than a perfectly competitive firm’s demand curveb) is the market demand curvec) is as elastic as a perfectly competitive firm’s demand curved) is not affected by the prices of complements
The solution in the prisoner’s dilemma is called the a. loss minimizing solution b. dominant strategy equilibrium c. revenue maximizing equilibrium d.
marginal revenue solution
If in the short run firms in a monopolistically competitive industry are earning positive economic profits, then in the long-runa. the demand curve of the typical firm will shift to the left.b. firms will leave the industry.c. the marginal revenue curve of the typical firm will shift upward.d.
the short-run supply curve of the product will shift to the right as firms enter.
Regardless of the class of oligopoly, if positive economic profits are to exist in the long run oligopolistic firms musta. cut prices.b.
advertise.c. avoid government regulation.d. prevent entry into the industry.
Which of the following statements concerning monopolistic competition in the long run is incorrect?a. There will be excess capacity in the industry.b.
Product price will exceed marginal cost.c. Marginal revenue will be less than the product price.d. The firm will operate at the minimum point of the average total cost curve.
A cartel isa) a group of oligopolistic firms that engage in formal collusionb) a group of monopolistically competitive firms which charge the same pricec) usually legal in the United Statesd) an agreement among rival firms to set prices independently
If costs are the same under both perfect competition and monopolistic competition, then in long run equilibrium prices will be a. higher under monopolistic competition.
b. equal to marginal revenue in both cases.c. equal to average total cost in perfect competition but equal to average variable cost in monopolistic competition.d. higher under perfect competition.
A firm’s demand for a resource is a a.
final demand b. induced demand c. derived demand d. marginal demand
We tend to see permanent price differentials in land becausea) the demand for land is highb) land has few usesc) location is the inherent quality that often determines its valued) real estate brokers are inefficient
When all of the returns to a resource are in the form of economic rent,a. price of that resource is determined exclusively by supplyb. the price of that resource is determined exclusively by demandc. the price and quantity of that resource are determined exclusively by supplyd.
the price and quantity of that resource are determined exclusively by demand
People who can earn higher market wages, other things constant, willa) take more leisureb) be more inclined to supply their labor to market work than to nonmarket workc) be more inclined to supply their labor to nonmarket work than to market workd) provide more labor to nonmarket work even if the market can provide the services more cheaply
Because leisure is a normal good, an increase in incomea) decreases your demand for leisure time and reduces your allocation of time to market workb) decreases your demand for leisure time and increases your allocation of time to market work and/or nonmarket workc) increases your demand for leisure time and reduces your allocation of time to market work and/or nonmarket workd) increases your demand for leisure time and increases your allocation of time to market work and/or a nonmarket work
The income and substitution effects of a change in the wage ratea) always work in the same directionb) always work in opposite directionsc) work in opposite directions only if the change is a decreased) work in the same direction only if the change is an increase
In order to be successful, an inclusive union musta. organize most workers in the industry.b. limit union membership.c. bargain only at the plant level.d.
organize only industries that have a large number of firms.
The United Auto Workers union is an example of a. an inclusive union.b. a company union.
c. an exclusive union.d. none of the above.
One way a union can increase wages in a competitive labor market is bya. increasing the demand for the product its members produce.b. decreasing the supply of labor.c. increasing the productivity of its members.d. doing any of the above.
Winning the $100 million top prize in a state lottery will tend to, ceteris paribusa. increase an individual’s supply of labor if the substitution effect outweighs the income effectb. have no impact on an individual’s labor supply decisionc. increase an individual’s supply of labord. decrease an individual’s supply of labor
Two workers are employed in the same job by the same firm, however, they are paid different wage rates. This could be explained by differences ina.
the income effectb. the price of the firm’s outputc. their abilityd. risk