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Econ 211 Final

question
If income decreases by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is
a. A normal good.
b. An irregular good.
c. An inferior good.
d. A substandard good.
answer
A
question
Coffee and cookies are complementary goods. The cross-price elasticity of demand between coffee and cookies is expected to be.
Select one:
a. Equal to zero.
b. Negative.
c. Undefined.
d. Positive.
answer
B
question
If bagels and doughnuts are substitutes, then a decrease in the price of doughnuts will result in
Select one:
a. An increase in the demand for bagels.
b. A decrease in the demand for bagels.
c. An increase in the demand for doughnuts.
d. A decrease in the demand for doughnuts.
answer
B
question
The production possibilities curve illustrates
Select one:
a. That there is no limit to the level of output.
b. The limitations that exist because of scarce resources.
c. That there is no limit to what an economy can produce.
d. The existence of unlimited wants and resources.
answer
B
question
Which of the following is not a factor of production?
Select one:
a. A psychiatrist.
b. A bulldozer.
c. Six thousand acres of farmland.
d. $100,000 cash.
answer
D
question
Ceteris paribus, as the number of substitutes for a good decreases, the
Select one:
a. Income elasticity of demand should become negative.
b. Price elasticity of demand should become larger.
c. Price elasticity of demand should become smaller.
d. Cross-price elasticity of demand should become negative.
answer
C
question
If the elasticity of demand is 2, and the price rises by 15 percent, then
Select one:
a. The quantity demanded will fall by 30 percent.
b. The percentage change in quantity demanded will fall as income rises.
c. The quantity demanded will increase by 30 percent.
d. The quantity demanded will rise by 7.5 percent.
answer
A
question
Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 0.5. You would advise Sam to
Select one:
a. Offer more high-priced products.
b. Raise his price to increase revenues.
c. Lower his price to increase revenue.
d. Keep his price the same to maximize revenues.
answer
C
question
Assume the price elasticity of demand for U.S. Chips Co. chips is 0.5. If the company increases the price of each bag of chips from $12 to $16, the number of bags of chips demanded will
Select one:
a. Increase by 20.0 percent.
b. Increase by 7.0 percent.
c. Decrease by 33.3 percent.
d. Decrease by 14.3 percent.
answer
D
question
Suppose computer prices at an office supply store fall from $100 to $90 and as a result the demanded quantity of typewriters decreases from 40 to 20 per month. The cross-price elasticity of demand is closest to
Select one:
a. 6.3.
b. 5.0.
c. 0.16.
d. 0.2.
answer
A
question
If there is a surplus at a given price, then
Select one:
a. That price is greater than the equilibrium price.
b. That price is lower than the equilibrium price.
c. The price is zero.
d. The market is in equilibrium at that price.
answer
A
question
Which of the following is true when an economy is producing efficiently?
Select one:
a. The economy is producing outside the production possibilities curve.
b. Everyone in the economy is happy.
c. The economy is getting the fewest goods and services from the available resources.
d. The economy is producing on the production possibilities curve.
answer
D
question
A rightward shift in a demand curve results in
Select one:
a. Higher equilibrium price, higher equilibrium quantity.
b. Lower equilibrium price, lower equilibrium quantity.
c. Higher equilibrium quantity, lower equilibrium price.
d. Lower equilibrium quantity, higher equilibrium price.
answer
A
question
If the demand for a product is elastic, then
Select one:
a. The change in the quantity demanded is greater than the change in income.
b. The percentage change in quantity demanded is greater than the percentage in price.
c. The percentage change in price is greater than the percentage change in quantity demanded.
d. Buyers are not very sensitive to a change in price.
answer
B
question
Which of the following events would allow the production possibilities curve to shift outward?
Select one:
a. People begin to retire at earlier ages.
b. More people enter the labor force.
c. The economy's capital stock declines.
d. Technology is lost.
answer
B
question
Suppose a university raises its tuition by 10 percent and as a result the enrollment of students decreases by 5 percent. The absolute value of the price elasticity of demand is
Select one:
a. 2.0.
b. 6.0.
c. 0.5.
d. 8.0.
answer
C
question
Capital, as economists use the term, refers to
Select one:
a. The costs of operating a business.
b. The cash needed to start a new business.
c. Shares of stock issued by businesses.
d. Final goods that are used to produce other goods and services.
answer
D
question
Short-run profits are maximized at the rate of output where
Select one:
a. Marginal revenue is zero.
b. Average total costs are minimized.
c. Marginal revenue is equal to marginal cost.
d. Total revenue is maximized.
answer
C
question
Social demand is equal to
Select one:
a. Private goods plus or minus externalities.
b. Market demand plus or minus externalities.
c. Tax revenue plus or minus externalities.
d. Public demand plus or minus externalities.
answer
B
question
Adam is the owner/operator of a flower shop. Last year he earned $245,000 in total revenue. His explicit costs were $170,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources). During the year he received three offers to work for other flower shops with the highest offer being $70,000 per year. Which of the following is true about Adam's accounting and economic profit?
Select one:
a. Accounting profit = $0; economic profit = negative $75,000.
b. Accounting profit = $75,000; economic profit = negative $100,000.
c. Accounting profit = $75,000; economic profit = $5,000.
d. Accounting profit = $175,000; economic profit = $75,000.
answer
C
question
A perfectly competitive firm should contract output when
Select one:
a. P >MC.
b. P >ATC.
c. P <MC.
d. P < ATC.
answer
C
question
Ceteris paribus, if sellers expect the price of video games to fall in the future, then right now there should be
Select one:
a. An increase in the demand for video games.
b. An increase in the supply of video games.
c. A decrease in the demand for video games.
d. No change in the supply of or demand for video games because the price is not changing right now.
answer
B
question
Ceteris paribus, the law of diminishing returns states that beyond some point, the
Select one:
a. Marginal physical product of a factor of production diminishes as more of it is employed with a given quantity of other inputs.
b. Returns on stocks and bonds diminish with higher security prices.
c. Addition to total utility diminishes as more units of a good are consumed.
d. Output of any good increases as more of a variable input is used.
answer
A
question
Which of the following occurs if government intervention forces the economy inside the production possibilities curve?
Select one:
a. Government failure.
b. Market failure.
c. Income inequality.
d. Externalities.
answer
A
question
The term market mechanism refers to
Select one:
a. Government laws and regulations concerning how the market should operate.
b. The use of market prices and sales to signal desired output.
c. Resource allocation based on a production possibilities curve.
d. Resource allocation based on consumer needs.
answer
B
question
If the consumption of a good yields external benefits, then
Select one:
a. The social demand is less than the market demand.
b. The social demand is equal to the market demand.
c. The social demand is greater than the market demand.
d. There is neither social demand nor market demand for the good.
answer
C
question
Which of the following rules is satisfied when a monopoly maximizes profits?
Select one:
a. MR = MC.
b. MR > MC.
c. Price = AVC.
d. Price< MC.
answer
A
question
The demand curve facing an oligopoly firm is kinked because
Select one:
a. The demand curve that is most inelastic is the most probable situation facing the company.
b. It is most likely that competitors will match price hikes as they practice price leadership.
c. It is most likely that rivals will match price cuts but not price increases.
d. Its competitors will match only price hikes.
answer
C
question
If economic profits are earned in a competitive market, then over time
Select one:
a. Equilibrium price will rise as more firms enter.
b. The market supply curve will shift to the left.
c. Normal profit will fall to zero as more firms enter.
d. Additional firms will enter the market.
answer
D
question
Which of the following is a barrier to entry into a monopoly market?
Select one:
a. Economies of scale.
b. Economic profits for the monopolist.
c. Production of a homogeneous product.
d. A large number of firms in the industry.
answer
A
question
Which of the following may not characterize an oligopoly?
Select one:
a. A few firms.
b. High barriers to entry.
c. Substantial control over price.
d. No market power.
answer
D
question
Reductions in minimum average costs that come about through increases in the size of plants and equipment are called
Select one:
a. Diseconomies of entry.
b. Economies of scale.
c. Barriers to entry.
d. Economies to monopoly power.
answer
B
question
If a monopolist is producing a level of output where MR is less than MC, then it should
Select one:
a. Lower its price.
b. Shift its marginal cost curve upward.
c. Lower its output.
d. Increase its output.
answer
C
question
What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?
Select one:
a. Cut their prices.
b. Reduce their costs.
c. Raise their prices.
d. Ignore the change.
answer
A
question
In which of the following cases would entry and exit cease?
Select one:
a. P > short-run ATC.
b. P < long-run ATC.
c. P>long-run ATC.
d. P = long-run ATC.
answer
D
question
If price is above the long-run competitive equilibrium level,
Select one:
a. Firms will shut down.
b. Firms will enter the market.
c. Firms will incur losses.
d. The market supply will shift to the left.
answer
B
question
Which of the following is true about the output level where marginal revenue equals marginal cost?
Select one:
a. The firm should increase its output.
b. The firm is maximizing profit.
c. Economic profits are equal to zero.
d. The firm should reduce its output.
answer
B
question
In monopoly and perfect competition, a firm should expand production when
Select one:
a. Marginal revenue is below marginal cost.
b. Price is above marginal cost.
c. Price is below marginal cost.
d. Marginal revenue is above marginal cost.
answer
D
question
Which of the following is characteristic of a perfectly competitive market?
Select one:
a. A small number of firms.
b. Exit of small firms when profits are high for large firms.
c. Zero economic profit in the long run.
d. Marginal revenue lower than price for each firm.
answer
C
1 of 39
question
If income decreases by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is
a. A normal good.
b. An irregular good.
c. An inferior good.
d. A substandard good.
answer
A
question
Coffee and cookies are complementary goods. The cross-price elasticity of demand between coffee and cookies is expected to be.
Select one:
a. Equal to zero.
b. Negative.
c. Undefined.
d. Positive.
answer
B
question
If bagels and doughnuts are substitutes, then a decrease in the price of doughnuts will result in
Select one:
a. An increase in the demand for bagels.
b. A decrease in the demand for bagels.
c. An increase in the demand for doughnuts.
d. A decrease in the demand for doughnuts.
answer
B
question
The production possibilities curve illustrates
Select one:
a. That there is no limit to the level of output.
b. The limitations that exist because of scarce resources.
c. That there is no limit to what an economy can produce.
d. The existence of unlimited wants and resources.
answer
B
question
Which of the following is not a factor of production?
Select one:
a. A psychiatrist.
b. A bulldozer.
c. Six thousand acres of farmland.
d. $100,000 cash.
answer
D
question
Ceteris paribus, as the number of substitutes for a good decreases, the
Select one:
a. Income elasticity of demand should become negative.
b. Price elasticity of demand should become larger.
c. Price elasticity of demand should become smaller.
d. Cross-price elasticity of demand should become negative.
answer
C
question
If the elasticity of demand is 2, and the price rises by 15 percent, then
Select one:
a. The quantity demanded will fall by 30 percent.
b. The percentage change in quantity demanded will fall as income rises.
c. The quantity demanded will increase by 30 percent.
d. The quantity demanded will rise by 7.5 percent.
answer
A
question
Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 0.5. You would advise Sam to
Select one:
a. Offer more high-priced products.
b. Raise his price to increase revenues.
c. Lower his price to increase revenue.
d. Keep his price the same to maximize revenues.
answer
C
question
Assume the price elasticity of demand for U.S. Chips Co. chips is 0.5. If the company increases the price of each bag of chips from $12 to $16, the number of bags of chips demanded will
Select one:
a. Increase by 20.0 percent.
b. Increase by 7.0 percent.
c. Decrease by 33.3 percent.
d. Decrease by 14.3 percent.
answer
D
question
Suppose computer prices at an office supply store fall from $100 to $90 and as a result the demanded quantity of typewriters decreases from 40 to 20 per month. The cross-price elasticity of demand is closest to
Select one:
a. 6.3.
b. 5.0.
c. 0.16.
d. 0.2.
answer
A
question
If there is a surplus at a given price, then
Select one:
a. That price is greater than the equilibrium price.
b. That price is lower than the equilibrium price.
c. The price is zero.
d. The market is in equilibrium at that price.
answer
A
question
Which of the following is true when an economy is producing efficiently?
Select one:
a. The economy is producing outside the production possibilities curve.
b. Everyone in the economy is happy.
c. The economy is getting the fewest goods and services from the available resources.
d. The economy is producing on the production possibilities curve.
answer
D
question
A rightward shift in a demand curve results in
Select one:
a. Higher equilibrium price, higher equilibrium quantity.
b. Lower equilibrium price, lower equilibrium quantity.
c. Higher equilibrium quantity, lower equilibrium price.
d. Lower equilibrium quantity, higher equilibrium price.
answer
A
question
If the demand for a product is elastic, then
Select one:
a. The change in the quantity demanded is greater than the change in income.
b. The percentage change in quantity demanded is greater than the percentage in price.
c. The percentage change in price is greater than the percentage change in quantity demanded.
d. Buyers are not very sensitive to a change in price.
answer
B
question
Which of the following events would allow the production possibilities curve to shift outward?
Select one:
a. People begin to retire at earlier ages.
b. More people enter the labor force.
c. The economy's capital stock declines.
d. Technology is lost.
answer
B
question
Suppose a university raises its tuition by 10 percent and as a result the enrollment of students decreases by 5 percent. The absolute value of the price elasticity of demand is
Select one:
a. 2.0.
b. 6.0.
c. 0.5.
d. 8.0.
answer
C
question
Capital, as economists use the term, refers to
Select one:
a. The costs of operating a business.
b. The cash needed to start a new business.
c. Shares of stock issued by businesses.
d. Final goods that are used to produce other goods and services.
answer
D
question
Short-run profits are maximized at the rate of output where
Select one:
a. Marginal revenue is zero.
b. Average total costs are minimized.
c. Marginal revenue is equal to marginal cost.
d. Total revenue is maximized.
answer
C
question
Social demand is equal to
Select one:
a. Private goods plus or minus externalities.
b. Market demand plus or minus externalities.
c. Tax revenue plus or minus externalities.
d. Public demand plus or minus externalities.
answer
B
question
Adam is the owner/operator of a flower shop. Last year he earned $245,000 in total revenue. His explicit costs were $170,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources). During the year he received three offers to work for other flower shops with the highest offer being $70,000 per year. Which of the following is true about Adam's accounting and economic profit?
Select one:
a. Accounting profit = $0; economic profit = negative $75,000.
b. Accounting profit = $75,000; economic profit = negative $100,000.
c. Accounting profit = $75,000; economic profit = $5,000.
d. Accounting profit = $175,000; economic profit = $75,000.
answer
C
question
A perfectly competitive firm should contract output when
Select one:
a. P >MC.
b. P >ATC.
c. P <MC.
d. P < ATC.
answer
C
question
Ceteris paribus, if sellers expect the price of video games to fall in the future, then right now there should be
Select one:
a. An increase in the demand for video games.
b. An increase in the supply of video games.
c. A decrease in the demand for video games.
d. No change in the supply of or demand for video games because the price is not changing right now.
answer
B
question
Ceteris paribus, the law of diminishing returns states that beyond some point, the
Select one:
a. Marginal physical product of a factor of production diminishes as more of it is employed with a given quantity of other inputs.
b. Returns on stocks and bonds diminish with higher security prices.
c. Addition to total utility diminishes as more units of a good are consumed.
d. Output of any good increases as more of a variable input is used.
answer
A
question
Which of the following occurs if government intervention forces the economy inside the production possibilities curve?
Select one:
a. Government failure.
b. Market failure.
c. Income inequality.
d. Externalities.
answer
A
question
The term market mechanism refers to
Select one:
a. Government laws and regulations concerning how the market should operate.
b. The use of market prices and sales to signal desired output.
c. Resource allocation based on a production possibilities curve.
d. Resource allocation based on consumer needs.
answer
B
question
If the consumption of a good yields external benefits, then
Select one:
a. The social demand is less than the market demand.
b. The social demand is equal to the market demand.
c. The social demand is greater than the market demand.
d. There is neither social demand nor market demand for the good.
answer
C
question
Which of the following rules is satisfied when a monopoly maximizes profits?
Select one:
a. MR = MC.
b. MR > MC.
c. Price = AVC.
d. Price< MC.
answer
A
question
The demand curve facing an oligopoly firm is kinked because
Select one:
a. The demand curve that is most inelastic is the most probable situation facing the company.
b. It is most likely that competitors will match price hikes as they practice price leadership.
c. It is most likely that rivals will match price cuts but not price increases.
d. Its competitors will match only price hikes.
answer
C
question
If economic profits are earned in a competitive market, then over time
Select one:
a. Equilibrium price will rise as more firms enter.
b. The market supply curve will shift to the left.
c. Normal profit will fall to zero as more firms enter.
d. Additional firms will enter the market.
answer
D
question
Which of the following is a barrier to entry into a monopoly market?
Select one:
a. Economies of scale.
b. Economic profits for the monopolist.
c. Production of a homogeneous product.
d. A large number of firms in the industry.
answer
A
question
Which of the following may not characterize an oligopoly?
Select one:
a. A few firms.
b. High barriers to entry.
c. Substantial control over price.
d. No market power.
answer
D
question
Reductions in minimum average costs that come about through increases in the size of plants and equipment are called
Select one:
a. Diseconomies of entry.
b. Economies of scale.
c. Barriers to entry.
d. Economies to monopoly power.
answer
B
question
If a monopolist is producing a level of output where MR is less than MC, then it should
Select one:
a. Lower its price.
b. Shift its marginal cost curve upward.
c. Lower its output.
d. Increase its output.
answer
C
question
What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?
Select one:
a. Cut their prices.
b. Reduce their costs.
c. Raise their prices.
d. Ignore the change.
answer
A
question
In which of the following cases would entry and exit cease?
Select one:
a. P > short-run ATC.
b. P < long-run ATC.
c. P>long-run ATC.
d. P = long-run ATC.
answer
D
question
If price is above the long-run competitive equilibrium level,
Select one:
a. Firms will shut down.
b. Firms will enter the market.
c. Firms will incur losses.
d. The market supply will shift to the left.
answer
B
question
Which of the following is true about the output level where marginal revenue equals marginal cost?
Select one:
a. The firm should increase its output.
b. The firm is maximizing profit.
c. Economic profits are equal to zero.
d. The firm should reduce its output.
answer
B
question
In monopoly and perfect competition, a firm should expand production when
Select one:
a. Marginal revenue is below marginal cost.
b. Price is above marginal cost.
c. Price is below marginal cost.
d. Marginal revenue is above marginal cost.
answer
D
question
Which of the following is characteristic of a perfectly competitive market?
Select one:
a. A small number of firms.
b. Exit of small firms when profits are high for large firms.
c. Zero economic profit in the long run.
d. Marginal revenue lower than price for each firm.
answer
C
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