Quiz-A profit-maximizing firm will – a. expand employment if marginal revenue product equals marginal resource cost

Question 1 (4 points)

A profit-maximizing firm will:

Question 1 options:

a) expand employment if marginal revenue product equals marginal resource cost.

b) reduce employment if marginal revenue product equals marginal resource cost.

c) reduce employment if marginal revenue product is less than marginal resource cost.

d) expand employment if marginal revenue product is less than marginal resource cost.

Question 2 (4 points)

Effective usury laws:

Question 2 options:

a) subsidize lenders.

b) penalize those who borrow at the below-market interest rate.

c) improve efficiency in investing.

d) keep some low-income people from obtaining credit and loans.

Question 3 (4 points)

The supply of land is:

Question 3 options:

a) almost perfectly inelastic.

b) negatively sloped.

c) relatively elastic.

d) perfectly elastic.

Question 4 (4 points)

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm’s profit-maximizing price will be:

Question 4 options:

a) $10.

b) $13.

c) $16.

d) $19.

Question 5 (4 points)

Refer to the above diagram for a purely competitive producer. If product price is P3:

Question 5 options:

a) the firm will maximize profit at point d.

b) the firm will earn an economic profit.

c) economic profits will be zero.

d) new firms will enter this industry.

Question 6 (4 points)

The concept of price elasticity of demand measures:

Question 6 options:

a) the slope of the demand curve.

b) the number of buyers in a market.

c) the extent to which the demand curve shifts as the result of a price decline.

d) the sensitivity of consumer purchases to price changes.

Question 7 (4 points)

For most producing firms:

Question 7 options:

a) marginal cost rises as output is carried to a certain level, and then begins to decline.

b) total costs rise as output is carried to a certain level, and then begin to decline.

c) average total costs decline as output is carried to a certain level, and then begin to rise.

d) average total costs rise as output is carried to a certain level, and then begin to decline.

Question 8 (4 points)

In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:

Question 8 options:

a) average total cost.

b) marginal revenue.

c) average variable cost.

d) average cost.

Question 9 (4 points)

Competition means that:

Question 9 options:

a) sellers can manipulate market price by causing product scarcities.

b) there are independently-acting buyers and sellers in each market.

c) a product can be purchased at a number of different prices.

d) there is more than one seller in a market.

Question 10 (4 points)

The antitrust laws are enforced by the:

Question 10 options:

a) Federal Bureau of Investigation.

b) Antimonopoly Court of Appeals.

c) Federal Justice Department and the Federal Trade Commission.

d) Department of Commerce.

Question 11 (4 points)

Long-run real wages in the United States have:

Question 11 options:

a) risen, because growth in the demand for labor has exceeded growth in the supply of labor.

b) risen, because the supply of labor has fallen over time.

c) fallen, because growth in the supply of labor has exceeded growth in the demand for labor.

d) fallen, because the demand for labor has fallen over time.

Question 12 (4 points)

The production possibilities curve illustrates the basic principle that:

Question 12 options:

a) the production of more of any one good will in time require smaller and smaller sacrifices of other goods.

b) an economy will automatically obtain full employment of its resources.

c) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

d) an economy’s capacity to produce increases in proportion to its population size.

Question 13 (4 points)

If the several oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of:

Question 13 options:

a) bilateral monopoly.

b) pure monopoly.

c) monopolistic competition.

d) pure competition.

Question 14 (4 points)

If you operated a small bakery, which of the following would be a variable cost in the short run?

Question 14 options:

a) baking ovens

b) interest on business loans

c) annual lease payment for use of the building

d) baking supplies (flour, salt, etc.)

Question 15 (4 points)

According to the paradox of voting:

Question 15 options:

a) public goods that cost more than the total benefits they confer may get produced under majority voting.

b) trading of votes may either add to or subtract from economic efficiency.

c) the median voter decides what public goods all voters should have.

d) majority voting fails under some circumstances to make consistent choices that reflect the community’s underlying preferences.

Question 16 (4 points)

Other things equal, interest rates are:

Question 16 options:

a) higher on large loans than on small loans.

b) higher on loans with tax-exempt interest payments.

c) lower on less risky loans than on riskier loans.

d) lower on short-term loans than on long-term loans.

Question 17 (4 points)

In the above figure, curves 1, 2, 3, and 4 represent the:

Question 17 options:

a) ATC, MC, AFC, and AVC curves respectively.

b) MC, AFC, AVC, and ATC curves respectively.

c) MC, ATC, AVC, and AFC curves respectively.

d) ATC, AVC, AFC, and MC curves respectively.

Question 18 (4 points)

Refer to the above labor market diagrams. The tactics of exclusive unionism are portrayed in Figure:

Question 18 options:

a) 4.

b) 3.

c) 2.

d) 1.

Question 19 (4 points)

To economists, the main difference between the short run and the long run is that:

Question 19 options:

a) the law of diminishing returns applies in the long run, but not in the short run.

b) in the long run all resources are variable, while in the short run at least one resource is fixed.

c) fixed costs are more important to decision making in the long run than they are in the short run.

d) in the short run all resources are fixed, while in the long run all resources are variable.

Question 20 (4 points)

Economists consider governments to be “wasteful:”

Question 20 options:

a) whenever they over- or underallocate resources to a project.

b) only when they overallocate resources to a project.

c) only when they underallocate resources to a project.

d) whenever they attempt to correct a market failure.

Question 21 (4 points)

Oligopolistic industries are characterized by:

Question 21 options:

a) a few dominant firms and substantial entry barriers.

b) a few dominant firms and no barriers to entry.

c) a large number of firms and low entry barriers.

d) a few dominant firms and low entry barriers.

Question 22 (4 points)

The long-run average total cost curve:

Question 22 options:

a) displays declining unit costs so long as output is increasing.

b) indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

c) has a shape which is the inverse of the law of diminishing returns.

d) can be derived by summing horizontally the average total cost curves of all firms in an industry.

Question 23 (4 points)

As it applies to insurance, the adverse selection problem is the tendency for:

Question 23 options:

a) those most likely to collect on insurance to buy it.

b) those who buy insurance to take less precaution in avoiding the insured risk.

c) sellers to price discriminate.

d) sellers to restrict output and charge high prices.

Question 24 (4 points)

The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?

Question 24 options:

a) Positive externality

b) Demand-side market failure

c) Supply-side market failure

d) All of these.

Question 25 (4 points)

Confronted with the same unit cost data, a monopolistic producer will charge:

Question 25 options:

a) the same price and produce the same output as a competitive firm.

b) a higher price and produce a larger output than a competitive firm.

c) a higher price and produce a smaller output than a competitive firm.

d) a lower price and produce a smaller output than a competitive firm.

Question 26 (4 points)

Which of the following is not a source of economies of scale?

Question 26 options:

a) learning-by-doing.

b) labor specialization.

c) use of larger machines.

d) inelastic resource supply curves.

Question 27 (4 points)

Which of the following best expresses the law of diminishing returns?

Question 27 options:

a) Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output.

b) Population growth automatically adjusts to that level at which the average product per worker will be at a maximum.

c) As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline.

d) Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.

Question 28 (4 points)

The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.

Question 28 options:

a) perfectly inelastic, perfectly elastic

b) downsloping, perfectly elastic

c) downsloping, perfectly inelastic

d) perfectly elastic, downsloping

Question 29 (4 points)

Specialization-the division of labor-enhances productivity and efficiency by:

Question 29 options:

a) allowing workers to take advantage of existing differences in their abilities and skills.

b) avoiding the time loss involved in shifting from one production task to another.

c) allowing workers to develop skills by working on one, or a limited number, of tasks.

d) all of the means identified in the other answers.

Question 30 (4 points)

If an individual is less careful about avoiding accidents or illness because she has health insurance, this is an example of:

Question 30 options:

a) the free-rider problem.

b) the moral hazard problem.

c) the adverse selection problem.

d) the Coase theorem.

Question 31 (4 points)

The economic function of profits and losses is to:

Question 31 options:

a) bring about a more equal distribution of income.

b) signal that resources should be reallocated.

c) eliminate small firms and reduce competition.

d) tell government which industries need to be subsidized.

Question 32 (4 points)

Defined narrowly as wages and salaries, labor’s share of the national income is about:

Question 32 options:

a) 70 percent.

b) 53 percent.

c) 42 percent.

d) 89 percent.

Question 33 (4 points)

Allocative efficiency is concerned with:

Question 33 options:

a) producing the combination of goods most desired by society.

b) achieving the full employment of all available resources.

c) producing every good with the least-cost combination of inputs.

d) reducing the concavity of the production possibilities curve.

Question 34 (4 points)

When economists say that health care services are overconsumed, they mean that:

Question 34 options:

a) rich people buy too much health care and poor people buy too little.

b) some resources now used in the health care industry could produce alternative goods and services that society values more highly.

c) health care is being purchased in amounts such that marginal benefits exceed marginal costs.

d) the price of health care is below equilibrium so that quantity demanded exceeds quantity supplied.

Question 35 (4 points)

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

Question 35 options:

a) A

b) B

c) C

d) D

Question 36 (4 points)

Cost-benefit analysis attempts to:

Question 36 options:

a) compare the real worth, rather than the market values, of various goods and services.

b) compare the relative desirability of alternative distributions of income.

c) determine whether it is better to cut government expenditures or reduce taxes.

d) compare the benefits and costs associated with any economic project or activity.

Question 37 (4 points)

The primary force encouraging the entry of new firms into a purely competitive industry is:

Question 37 options:

a) normal profits earned by firms already in the industry.

b) economic profits earned by firms already in the industry.

c) government subsidies for start-up firms.

d) a desire to provide goods for the betterment of society.

Question 38 (4 points)

A government subsidy to the producers of a product:

Question 38 options:

a) reduces product supply.

b) increases product supply.

c) reduces product demand.

d) increases product demand.

Question 39 (4 points)

In the above diagram, the elimination of discrimination is best represented by:

Question 39 options:

a) a move from C to E.

b) an inward shift of the production possibilities curve.

c) a move from A to D.

d) a move from E to C.

Question 40 (4 points)

Microeconomics is concerned with:

Question 40 options:

a) the aggregate or total levels of income, employment, and output.

b) a detailed examination of specific economic units that make up the economic system.

c) positive economics, but not normative economics.

d) the establishing of an overall view of the operation of the economic system.

Question 41 (4 points)

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:

Question 41 options:

a) is an example of irrational behavior.

b) implies that reading should be taught through phonics rather than the whole language method.

c) contradicts the economic perspective.

d) implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

Question 42 (4 points)

Entry fees at national parks and monuments are an example of:

Question 42 options:

a) the ability-to-pay principle of taxation.

b) the benefits-received principle of taxation.

c) government bureaucracy and inefficiency.

d) the principle of limited and bundled choice.

Question 43 (4 points)

When the U.S. is described as having a dual system of health care, this means that:

Question 43 options:

a) government provides basic health insurance for all Americans and private insurance covers services beyond the basic level.

b) high quality care is provided in urban areas, but care in rural areas is of poor quality.

c) those Americans with good insurance or substantial wealth receive world-class health care, while those without insurance receive no or low quality health care.

d) the high-risk segment of the population is required to have health insurance, while the low-risk sector is not.

Question 44 (4 points)

Economists call the pursuit of a transfer of wealth through government at someone else’s expense:

Question 44 options:

a) the paradox of voting.

b) adverse selection.

c) rent-seeking behavior.

d) the benefits-received principle.

Question 45 (4 points)

The TANF program:

Question 45 options:

a) is a form of social insurance.

b) has been found to be unconstitutional by the Supreme Court.

c) limits total lifetime welfare benefits to 5 years and requires people to work after receiving benefits for 2 years.

d) perpetuates the so-called culture of poverty.

Question 46 (4 points)

Where there is natural monopoly, government is most likely to implement:

Question 46 options:

a) social regulation.

b) antitrust policy.

c) industrial regulation.

d) an externality containment policy.

Question 47 (4 points)

Refer to the above diagram in which S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The efficiency loss of the tax is shown by area(s):

Question 47 options:

a) A + B + C + E + F.

b) A + B + C.

c) A + B + F.

d) E + F.

Question 48 (4 points)

Which of the following groups has the highest poverty rate?

Question 48 options:

a) age 65 or over

b) foreign-born (non citizens)

c) Hispanics

d) female-headed households

Question 49 (4 points)

“Present value” refers to the:

Question 49 options:

a) value today of some amount of money to be received in the future.

b) current value of money held in a bank account.

c) amount to which some current amount of money will grow over time.

d) interest rate specified when a loan contract is signed.

Question 50 (4 points)

The field of economics that analyzes government decision making, politics, and elections is called:

Question 50 options:

a) public finance.

b) public choice theory.

c) collective economics.

d) political economy.

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