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Economics midterm 2

question
B
answer
Suppose a firm wants to calculate its total revenues. In addition to quantity, it would need to know ______________.
A. Cost
B. Price
C. profit
D. Implicit cost
question
C
answer
Which of the following is an example of an explicit cost?
A. Opportunity cost
B. Marginal utility
C. Materials cost
D. Total revenue
question
B
answer
Since it takes time to vary ____________, you would usually expect demand to be more elastic than supply in the short run.
A. Wages
B. Production
C. Peoples preferences
D. The money
question
D
answer
Suppose you decide to quit your job as an accountant and open an ice cream store. In order to calculate the opportunity cost of your decision, you need to know ____________.
A. The fixed cost of the ice cream store
B. The labor cost of the ice cream store
C. The price and amount of ice cream you sell
D. The salary you would have earned as an accountant
question
A
answer
In the short run, a type of cost that does not change with the level of output produced is a(n) _____________.
A. Fixed cost
B. Variable cost
C. Marginal cost
D. Average total cost
question
B
answer
Under which of the following conditions will a firm take longer to earn significant profits, all else equal?
A. A firm with zero fixed costs
B. A firm with high fixed costs
C. A firm with low fixed costs
D. A firm with low variable costs
question
B
answer
A firm produces 1,000 widgets. It sells widgets for $1. In order to calculate the firm's average profits, one would need to know ___________.
A. Marginal costs
B. Total costs
C. Price
D. Elasticity
question
D
answer
When strawberry prices increase 20 percent, the quantity demanded of whipped cream falls 10 percent. What is the cross-price elasticy of demand between strawberries and whipped cream?
A. 2
B. -2
C. -0.5
D. 0.5
question
A
answer
Wage floors like the minimum wage lead to a ________ of workers, which is another way of saying "unemployment".
A. Surplus
B. Shortage
C. Equilibrium quantity
D. Equilibrium price
question
B
answer
Assume a firm's cost of machinery decreases. To reduce its total costs while maintaining current production levels, the firm could ________.
A. Use more labor and less machines
B. Use more machines and less labor
C. Use more labor and the same amount of machines
D. Change the production technique
question
C
answer
Refer to the figure. When a firm's long run average cost curve is tangent to its short run average cost curve at a point where short run average total costs are falling, that firm is experiencing _______.
A. Diseconomies of scale
B. Constant returns to scale
C. Economies of scale
D. Diminishing marginal returns
question
D
answer
A factory that makes 1,000 widgets can do so at an average cost of $20 per widget. A factory that makes 2,000 widgets can do so at an average cost of $45 per widget. In this case, the market likely experiences ______.
A. Falling labor costs
B. Economies of scale
C. Constant returns to scale
D. Diseconomies of scale
question
C
answer
Which of the following is an example of an explicit cost?
A. Opportunity cost
B. Marginal utility
C. Materials costs
D. Total revenue
question
D
answer
When will shifts in supply have a larger effect on the equilibrium price than on the equilibrium quantity?
A. When demand is high
B. When demand is low
C. When demand is elastic
D. When demand is Inelastic
question
D
answer
Which of the following is a characteristic of a perfectly competitive market?
A. Firms produce different products.
B. There are only a few firms.
C. Firms are not able to freely enter and exit
D. Firms are price takers.
question
B
answer
If a perfectly competitive firm is making economic profits in the short run, firms ______ the industry, driving down the price until profits _____ in the long run.
A. Enter, are negative
B. Enter, are zero
C. Exit, are negative
D. Exit, are zero
question
B
answer
Under which of the following conditions will a firm take longer to earn significant profits, all else equal?
A. A firm with zero fixed costs
B. A firm with high fixed costs
C. A firm with low fixed costs
D. A firm with low variable costs
question
B
answer
A revolution in the telecommunications industry makes it easier to use automated menu systems in restaurants. Which of the following describes the effect in the restaurant labor market?
A. Labor demand shifts to the right.
B. Labor demand shifts to the left.
C. Labor supply shifts to the right.
D. Labor supply shifts to the left.
question
A
answer
A profit-maximizing firm will continue to produce in the short run as long as _______ is greater than _______.
A. Price, average variable cost
B. Marginal cost, marginal revenue
C. Elasticity, 1
D. Average total cost, average variable cost
question
C
answer
Suppose a firm sells widgets at a price of $1 each and the average costs are $0.40. What does one need to know in order to calculate total profits?
A. Elasticity
B. Marginal costs
C. Quantity produced
D. Marginal revenue
question
C
answer
When _________, a profit-maximizing firm in perfect competition begins to incur losses.
A. MR is greater than MC
B. Price is equal to the minimum of ATC
C. Price is less than the minimum of ATC
D. Price is greater than the minimum of ATC
question
B
answer
Suppose a firm is currently experiencing diseconomies of scale. Over time, one would expect firm size to ________.
A. Increase
B. Decrease
C. Reach a maximum
D. Stay the same
question
D
answer
Which of the following is a characteristic of a perfectly competitive market?
A. Firms produce different products.
B. There are only a few firms.
C. Firms are not able to freely enter and exit.
D. Firms are price takers.
question
A
answer
In a perfectly competitive market, firm entry shifts the _______ to the ________.
A. Market supply curve, right
B. Market supply curve, left
C. Market demand curve, right
D. Firm demand curve, right
question
A
answer
If a firm in a perfect competition is experiencing losses, firms will _______ the industry, shifting the market supply curve to the left, causing market price to _______ until profits equal zero.
A. Exit, rise
B. Exit, fall
C. Enter, rise
D. Enter, fall
question
B
answer
If a perfectly competitive firm is making economic profits in the short run, firms ______ the industry, driving down the price until profits ______ in the long run.
A. Enter, are negative
B. Enter, are zero
C. Exit, are negative
D. Exit, are zero
question
C
answer
Which of the following best describes the effect of an increase in a worker's wages on his demand curve for a normal good?

A. Movement along
B. No change
C a rightward shift
D a leftward shift
question
A
answer
Can a perfectly competitive firm increase profits by selling an extremely high quantity of product?

A. No, because rising marginal and average costs will eventually make expanding production unprofitable.
B. No, because the firm will not be able to find enough workers to produce that much quantity.
C. Yes, because the firm can sell the product at the market price.
D. Yes, because other firms will not be able to compete with this firm.
question
D
answer
Which is the best example of a real-world market that is close to perfect competition?

A. A market with product differentiation, such as ice cream (Coldstone, Dairy Queen, etc.)
B. A market where a few firms have a large market share, such as operating systems for mobile devices (Apple iOS, Google, Android, Microsoft Windows)
C. A market with many barriers to entry, such as computers chips (Intel, AMD, etc.)
D. A market with many sellers and little product differentiation (such as fruits, vegetables, and other agricultural goods).
question
D
answer
When does a profit maximizing firm in perfect competition shut down?

A. When MR is greater than MC
B. When price is equal to the minimum of ATC
C. When price is less than the minimum of ATC and greater than the minimum of AVC
D. When price is less than the minimum of AVC
question
A
answer
If a firm in perfect competition is experiencing losses, firms will _______ the industry, shifting the market supply curve to the left, causing market price to _______ until profits equal zero.

A. Exit, rise
B. Exit, fall
C. Enter, rise
D. Enter, fall
question
D
answer
If the period of patent protection were to be reduced, it would make innovation less lucrative, so the amount of ______ would likely decline.

A. Patent protection applications
B. Product marketing
C. Sales
D. Research and development
question
A
answer
Which of these is an example of predatory pricing?

A. A clothing manufacturer sells t-shirts online for $8 that cost $9 to make.
B. A microchip firm charges a laptop maker $50 for a chip that costs $45 to make.
C. A farmer sells a bushel of corn for the same amount of money it cost to produce that bushel.
D. A boutique charges $150 for a pair of pants it bought from a who sales for $25.
question
B
answer
Which of the following encourages the development of natural monopolies?

A. Diseconomies of scale and rising marginal costs
B. Economies of scale and control over a physical resource
C. Trademarks and copyrights to protect innovation
D. Too many competitors keeping prices low
question
A
answer
If a firm in perfect competition is experiencing losses, firms will ______ the industry, shifting the market supply curve to the left, causing marking price to ______ until profits equal zero.

A. Exit, rise
B. Exit, fall
C. Enter, rise
D. Enter, fall
question
D
answer
A price ceiling imposed above equilibrium price will result in ______ in the market.

A. Excess supply (surplus)
B. Excess demand (shortage)
C. Excess returns
D. No change
question
B
answer
For a monopoly, the perceived demand curve for its product is _______, while for a perfectly competitive firm, the perceived demand curve for its product is _______.

A. Downward sloping, downward sloping
B. Downward sloping, horizontal
C. Horizontal, downward sloping
D. Horizontal, horizontal
question
A
answer
A monopoly achieves allocative efficiency when it's produces at a level where _______.

A. The marginal benefit to society equals marginal cost
B. It's normal profit is the same as its economic profit
C. Marginal cost equals marginal revenue
D. The marginal cost of negative externalities is zero
question
A
answer
A bakery is considering whether or not to hire an extra baker for the night shift. If that baker would earn $20 per hour, work an 8 hour shift, and produce 100 pastries that would sell for $3 each, the marginal cost of the new baker is ______.

A. $1.60
B. $3.00
C. $140
D. $160
question
A
answer
In a perfectly competitive market, firm entry shifts the _______ to the _______.

A. Market supply curve, right
B. Market supply curve, left
C. Market demand curve, right
D. Firm demand curve, right
question
A
answer
A monopolistic competitor advertises in order to _______.

A. Increase demand for its product
B. Achieve allocative efficiency
C. Sell its products more cheaply than the competition
D. Normalize its profits
question
C
answer
Products with phrases attached to them like "hand-made", "locally grown", are examples of markets with ________.

A. Perceived demand
B. Perfectly competitive conditions
C. Differentiated products
D. Low marginal cost
question
B
answer
By setting price above marginal cost, monopolistic competitors always make price and output decisions that are similar to firms in ________.

A. Perfect competition
B. Monopoly
C. Oligopoly
D. Duopoly
question
B
answer
Which of the following examples is closest to the case of a natural monopoly?

A. The market for a pharmaceutical drug in which patent protection prevents other firms from making the same drug.
B. The market for a utility like water in which it would be too costly to have many different companies try to compete to supply the ground water
C. The market for an agricultural good like strawberries.
D. The market for music in which content is protected under
question
B
answer
Which of the following best describes the law of demand?

A. An increase in price is associated with an increase in quantity demanded.
B. An increase in price is associated with a decrease in quantity demanded.
C. An increase in price is associated with a decrease in quantity supplied.
D. A decrease in price is associated with a decrease in quantity supplied.
question
A
answer
While monopolistic ally competitive industries encourage innovation, one inefficiency such firms incur is due to ______.

A. Average total costs not being minimized
B. High economic profits
C. High barriers to entry
D. Low marginal costs
question
A
answer
Two firms, A and B, are in a duopoly. Each firm can either produce a high or a low amount of output. The best strategy for both firms is to _______.

A. Collude to produce at the low level
B. Agree to alternate between high and low output
C. Produce at the highest level possible
D. Seek a government subsidy to keep output high
question
A
answer
Instead of engaging in a price war, firms in an oligopoly can ______ to keep the price of their good high.

A. Collude with each other
B. Ask for a government subsidy
C. Advertise collectively
D. Unilaterally restrict production
question
C
answer
Suppose a profit-maximizing monopolist produces 10 widgets. To find the price charged by the monopolist for these widgets, you need to know the _______.

A. Marginal revenue
B. Marginal cost
C. Demand curve
D. Elasticity
question
B
answer
Suppose that a central bank decides to lower interest rates to boost the economy. This is an example of a ______ policy.

A. Long-run
B. Monetary
C. Fiscal
D. Division of labor
1 of 50
question
B
answer
Suppose a firm wants to calculate its total revenues. In addition to quantity, it would need to know ______________.
A. Cost
B. Price
C. profit
D. Implicit cost
question
C
answer
Which of the following is an example of an explicit cost?
A. Opportunity cost
B. Marginal utility
C. Materials cost
D. Total revenue
question
B
answer
Since it takes time to vary ____________, you would usually expect demand to be more elastic than supply in the short run.
A. Wages
B. Production
C. Peoples preferences
D. The money
question
D
answer
Suppose you decide to quit your job as an accountant and open an ice cream store. In order to calculate the opportunity cost of your decision, you need to know ____________.
A. The fixed cost of the ice cream store
B. The labor cost of the ice cream store
C. The price and amount of ice cream you sell
D. The salary you would have earned as an accountant
question
A
answer
In the short run, a type of cost that does not change with the level of output produced is a(n) _____________.
A. Fixed cost
B. Variable cost
C. Marginal cost
D. Average total cost
question
B
answer
Under which of the following conditions will a firm take longer to earn significant profits, all else equal?
A. A firm with zero fixed costs
B. A firm with high fixed costs
C. A firm with low fixed costs
D. A firm with low variable costs
question
B
answer
A firm produces 1,000 widgets. It sells widgets for $1. In order to calculate the firm's average profits, one would need to know ___________.
A. Marginal costs
B. Total costs
C. Price
D. Elasticity
question
D
answer
When strawberry prices increase 20 percent, the quantity demanded of whipped cream falls 10 percent. What is the cross-price elasticy of demand between strawberries and whipped cream?
A. 2
B. -2
C. -0.5
D. 0.5
question
A
answer
Wage floors like the minimum wage lead to a ________ of workers, which is another way of saying "unemployment".
A. Surplus
B. Shortage
C. Equilibrium quantity
D. Equilibrium price
question
B
answer
Assume a firm's cost of machinery decreases. To reduce its total costs while maintaining current production levels, the firm could ________.
A. Use more labor and less machines
B. Use more machines and less labor
C. Use more labor and the same amount of machines
D. Change the production technique
question
C
answer
Refer to the figure. When a firm's long run average cost curve is tangent to its short run average cost curve at a point where short run average total costs are falling, that firm is experiencing _______.
A. Diseconomies of scale
B. Constant returns to scale
C. Economies of scale
D. Diminishing marginal returns
question
D
answer
A factory that makes 1,000 widgets can do so at an average cost of $20 per widget. A factory that makes 2,000 widgets can do so at an average cost of $45 per widget. In this case, the market likely experiences ______.
A. Falling labor costs
B. Economies of scale
C. Constant returns to scale
D. Diseconomies of scale
question
C
answer
Which of the following is an example of an explicit cost?
A. Opportunity cost
B. Marginal utility
C. Materials costs
D. Total revenue
question
D
answer
When will shifts in supply have a larger effect on the equilibrium price than on the equilibrium quantity?
A. When demand is high
B. When demand is low
C. When demand is elastic
D. When demand is Inelastic
question
D
answer
Which of the following is a characteristic of a perfectly competitive market?
A. Firms produce different products.
B. There are only a few firms.
C. Firms are not able to freely enter and exit
D. Firms are price takers.
question
B
answer
If a perfectly competitive firm is making economic profits in the short run, firms ______ the industry, driving down the price until profits _____ in the long run.
A. Enter, are negative
B. Enter, are zero
C. Exit, are negative
D. Exit, are zero
question
B
answer
Under which of the following conditions will a firm take longer to earn significant profits, all else equal?
A. A firm with zero fixed costs
B. A firm with high fixed costs
C. A firm with low fixed costs
D. A firm with low variable costs
question
B
answer
A revolution in the telecommunications industry makes it easier to use automated menu systems in restaurants. Which of the following describes the effect in the restaurant labor market?
A. Labor demand shifts to the right.
B. Labor demand shifts to the left.
C. Labor supply shifts to the right.
D. Labor supply shifts to the left.
question
A
answer
A profit-maximizing firm will continue to produce in the short run as long as _______ is greater than _______.
A. Price, average variable cost
B. Marginal cost, marginal revenue
C. Elasticity, 1
D. Average total cost, average variable cost
question
C
answer
Suppose a firm sells widgets at a price of $1 each and the average costs are $0.40. What does one need to know in order to calculate total profits?
A. Elasticity
B. Marginal costs
C. Quantity produced
D. Marginal revenue
question
C
answer
When _________, a profit-maximizing firm in perfect competition begins to incur losses.
A. MR is greater than MC
B. Price is equal to the minimum of ATC
C. Price is less than the minimum of ATC
D. Price is greater than the minimum of ATC
question
B
answer
Suppose a firm is currently experiencing diseconomies of scale. Over time, one would expect firm size to ________.
A. Increase
B. Decrease
C. Reach a maximum
D. Stay the same
question
D
answer
Which of the following is a characteristic of a perfectly competitive market?
A. Firms produce different products.
B. There are only a few firms.
C. Firms are not able to freely enter and exit.
D. Firms are price takers.
question
A
answer
In a perfectly competitive market, firm entry shifts the _______ to the ________.
A. Market supply curve, right
B. Market supply curve, left
C. Market demand curve, right
D. Firm demand curve, right
question
A
answer
If a firm in a perfect competition is experiencing losses, firms will _______ the industry, shifting the market supply curve to the left, causing market price to _______ until profits equal zero.
A. Exit, rise
B. Exit, fall
C. Enter, rise
D. Enter, fall
question
B
answer
If a perfectly competitive firm is making economic profits in the short run, firms ______ the industry, driving down the price until profits ______ in the long run.
A. Enter, are negative
B. Enter, are zero
C. Exit, are negative
D. Exit, are zero
question
C
answer
Which of the following best describes the effect of an increase in a worker's wages on his demand curve for a normal good?

A. Movement along
B. No change
C a rightward shift
D a leftward shift
question
A
answer
Can a perfectly competitive firm increase profits by selling an extremely high quantity of product?

A. No, because rising marginal and average costs will eventually make expanding production unprofitable.
B. No, because the firm will not be able to find enough workers to produce that much quantity.
C. Yes, because the firm can sell the product at the market price.
D. Yes, because other firms will not be able to compete with this firm.
question
D
answer
Which is the best example of a real-world market that is close to perfect competition?

A. A market with product differentiation, such as ice cream (Coldstone, Dairy Queen, etc.)
B. A market where a few firms have a large market share, such as operating systems for mobile devices (Apple iOS, Google, Android, Microsoft Windows)
C. A market with many barriers to entry, such as computers chips (Intel, AMD, etc.)
D. A market with many sellers and little product differentiation (such as fruits, vegetables, and other agricultural goods).
question
D
answer
When does a profit maximizing firm in perfect competition shut down?

A. When MR is greater than MC
B. When price is equal to the minimum of ATC
C. When price is less than the minimum of ATC and greater than the minimum of AVC
D. When price is less than the minimum of AVC
question
A
answer
If a firm in perfect competition is experiencing losses, firms will _______ the industry, shifting the market supply curve to the left, causing market price to _______ until profits equal zero.

A. Exit, rise
B. Exit, fall
C. Enter, rise
D. Enter, fall
question
D
answer
If the period of patent protection were to be reduced, it would make innovation less lucrative, so the amount of ______ would likely decline.

A. Patent protection applications
B. Product marketing
C. Sales
D. Research and development
question
A
answer
Which of these is an example of predatory pricing?

A. A clothing manufacturer sells t-shirts online for $8 that cost $9 to make.
B. A microchip firm charges a laptop maker $50 for a chip that costs $45 to make.
C. A farmer sells a bushel of corn for the same amount of money it cost to produce that bushel.
D. A boutique charges $150 for a pair of pants it bought from a who sales for $25.
question
B
answer
Which of the following encourages the development of natural monopolies?

A. Diseconomies of scale and rising marginal costs
B. Economies of scale and control over a physical resource
C. Trademarks and copyrights to protect innovation
D. Too many competitors keeping prices low
question
A
answer
If a firm in perfect competition is experiencing losses, firms will ______ the industry, shifting the market supply curve to the left, causing marking price to ______ until profits equal zero.

A. Exit, rise
B. Exit, fall
C. Enter, rise
D. Enter, fall
question
D
answer
A price ceiling imposed above equilibrium price will result in ______ in the market.

A. Excess supply (surplus)
B. Excess demand (shortage)
C. Excess returns
D. No change
question
B
answer
For a monopoly, the perceived demand curve for its product is _______, while for a perfectly competitive firm, the perceived demand curve for its product is _______.

A. Downward sloping, downward sloping
B. Downward sloping, horizontal
C. Horizontal, downward sloping
D. Horizontal, horizontal
question
A
answer
A monopoly achieves allocative efficiency when it's produces at a level where _______.

A. The marginal benefit to society equals marginal cost
B. It's normal profit is the same as its economic profit
C. Marginal cost equals marginal revenue
D. The marginal cost of negative externalities is zero
question
A
answer
A bakery is considering whether or not to hire an extra baker for the night shift. If that baker would earn $20 per hour, work an 8 hour shift, and produce 100 pastries that would sell for $3 each, the marginal cost of the new baker is ______.

A. $1.60
B. $3.00
C. $140
D. $160
question
A
answer
In a perfectly competitive market, firm entry shifts the _______ to the _______.

A. Market supply curve, right
B. Market supply curve, left
C. Market demand curve, right
D. Firm demand curve, right
question
A
answer
A monopolistic competitor advertises in order to _______.

A. Increase demand for its product
B. Achieve allocative efficiency
C. Sell its products more cheaply than the competition
D. Normalize its profits
question
C
answer
Products with phrases attached to them like "hand-made", "locally grown", are examples of markets with ________.

A. Perceived demand
B. Perfectly competitive conditions
C. Differentiated products
D. Low marginal cost
question
B
answer
By setting price above marginal cost, monopolistic competitors always make price and output decisions that are similar to firms in ________.

A. Perfect competition
B. Monopoly
C. Oligopoly
D. Duopoly
question
B
answer
Which of the following examples is closest to the case of a natural monopoly?

A. The market for a pharmaceutical drug in which patent protection prevents other firms from making the same drug.
B. The market for a utility like water in which it would be too costly to have many different companies try to compete to supply the ground water
C. The market for an agricultural good like strawberries.
D. The market for music in which content is protected under
question
B
answer
Which of the following best describes the law of demand?

A. An increase in price is associated with an increase in quantity demanded.
B. An increase in price is associated with a decrease in quantity demanded.
C. An increase in price is associated with a decrease in quantity supplied.
D. A decrease in price is associated with a decrease in quantity supplied.
question
A
answer
While monopolistic ally competitive industries encourage innovation, one inefficiency such firms incur is due to ______.

A. Average total costs not being minimized
B. High economic profits
C. High barriers to entry
D. Low marginal costs
question
A
answer
Two firms, A and B, are in a duopoly. Each firm can either produce a high or a low amount of output. The best strategy for both firms is to _______.

A. Collude to produce at the low level
B. Agree to alternate between high and low output
C. Produce at the highest level possible
D. Seek a government subsidy to keep output high
question
A
answer
Instead of engaging in a price war, firms in an oligopoly can ______ to keep the price of their good high.

A. Collude with each other
B. Ask for a government subsidy
C. Advertise collectively
D. Unilaterally restrict production
question
C
answer
Suppose a profit-maximizing monopolist produces 10 widgets. To find the price charged by the monopolist for these widgets, you need to know the _______.

A. Marginal revenue
B. Marginal cost
C. Demand curve
D. Elasticity
question
B
answer
Suppose that a central bank decides to lower interest rates to boost the economy. This is an example of a ______ policy.

A. Long-run
B. Monetary
C. Fiscal
D. Division of labor
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