Reference no: EM13148412

Question 1 A firm that emerges as the only seller in an industry with economies of scale is a(n):Answer  Monopoly  Oligopoly  Natural oligopoly  Natural monopoly

Question 2 The profit maximizing rule MR = MC applies to:Answer  All firms  Monopolists only  Perfect competitors only  Oligopolistic firms

Question 3 Suppose that the total cost curve for a firm is given by the equation TC = a + bQ, where 'a' and 'b' are positive numbers. This firm's average costs will then:Answer  Rise over the entire range of output  Fall at first and then rise as output rises  Fall over the entire range of output  Rise at first and then fall as output rises

Question 4 Constant returns to scale occur when a doubling of all inputs:Answer  Doubles the price of outputs  More than doubles output  Less than doubles output  Exactly doubles output

Question 5 If a firm triples all its inputs and output triples as a result, then the firm:Answer  Has increasing returns to scale  Has economies of scale  Has constant returns to scale  Will have lower total costs

Question 6 The term natural monopoly refers to:Answer  Government ownership of parks  The desire of all firms to be monopolists  Industries with small fixed costs  Industries with economies of scale

Question 7 Suppose both a competitive firm and a monopolist firm are charging $5 for their respective outputs. One can infer that:Answer  Marginal revenue is $5 for both firms  Marginal revenue is $5 for the competitive firm and less than $5 for the monopolist firm  Marginal revenue is less than $5 for both firms  Both firms are earning profits

Question 8 The use of game theory is necessary under which of the following conditions?Answer  Buyers and sellers have limited information.  Economists take time into account in their analysis.  Consumers maximize their utility.  There is interdependency between firms' decisions.

Question 9 The assumption that individuals act out of narrow self-interest is:Answer  A reasonable first approximation  Justified only for monetary decisions  Less justified today than 100 years ago  Rarely justified

Question 10 Which of the following is not a requirement of a game?Answer  Players  Strategies  Dominant strategies  Knowledge of the payoffs

Question 11 The prisoner's dilemma refers to games:Answer  Without dominant strategies  Without a Nash equilibrium  With one dominant strategy  Where the playing of dominant strategies leads to a less desirable equilibrium

Question 12 In the U.S., drug pushers and cartels face the same problem:Answer  That the product they sell is illegal  What to do with their excess profits  Not enough consumers  No legal remedy for violations of their agreements

Question 13 According to the textbook, standing at a concert and talking loudly at parties are examples of:Answer  Material solutions to a commitment problem  Unpleasant but frequent behaviors  Undesirable outcomes stemming from a prisoner's dilemma  Psychological solutions to a commitment problem

Question 14 In The Scarlet Letter, the punishment for adultery is to always wear a large, red letter A. This is an example of:Answer  Unenlightened punishment  Using public ridicule to solve the commitment problem in marriage  Overbearing control by the church  Using material incentive to solve the commitment problem in marriage

Question 15 If the external benefit of an activity is added to the private benefits, then the:Answer  Demand curve shifts left  Quantity demanded rises  Supply curve shifts right  Demand curve shifts right

Question 16 When some fraction of the benefit of an activity is received by people not participating in the activity, it is called a(n):Answer  Winner's curse  Positive externality  Negative externality  Efficient allocation

Question 17 Which of the following is not an example of a positional arms control agreement?Answer  Campaign spending limits  Roster limits for professional sports teams  Contracts containing a binding arbitration clause in case of breach  Air pollution limits

Question 18 In the case of either an external cost or an external benefit, the invisible hand fails to generate the efficient outcome because:Answer  The model is not capable of incorporating externalities  Buyers and sellers take only their self-interests into account  Too much is produced  Too little is produced

Question 19 Which of the following is an example of a governmental solution to an external benefit?Answer  Requiring autos to meet minimum emissions regulation  Building-safety requirements for office buildings  Public service ads discouraging smoking  Public service ads encouraging exercise and good nutrition

Question 20 If, after an externality is corrected, the equilibrium price rises and the equilibrium quantity falls, the externality must have been a(n):Answer  External benefit  Internal cost  External cost  Positive externality

Question 21 Which of the following is an example of an external benefit?Answer  Honeybees providing honey for beekeepers  Beekeepers providing honey for consumers  Apple trees providing shelter for honeybees  Honeybees pollinating apple trees

Question 22 Given the typical shapes of the marginal costs and marginal benefits of collecting information:Answer  There is no equilibrium amount  Consumers tend to become experts about most goods  Consumers remain completely ignorant about most goods  The equilibrium is somewhere between complete ignorance and becoming an expert

Question 23 Markets in which asymmetric information is present lead to the:Answer  Asymmetric model  Risk adverse model  Limes model  Lemons model

Question 24 In which of the following markets is the presence of asymmetric information most critical for the buyers?Answer  The market for haircuts  The market for used books  The market for pants  The market for existing houses

Question 25 The relevance of expected value to the search decision of the consumer is:Answer  That the outcome of a particular search is certain  That one may not be able to purchase the good after it is found  That the outcome of a particular search is uncertain  That one always knows the value of the next search

Question 26 The difference between the price of electronic equipment in a retail store and at an Internet store reflects in part:Answer  The extent to which middlemen drive the price up for extra profit  The lack of competition between brick-and-mortar stores and online stores  The value of personal attention and support at a retail store  That online stores do not profit maximize

Question 27
The invisible hand will lead to __________ information than is socially optimal because of __________.Answer  more; free riders  less; external benefits  more; external costs  less; free riders

Question 28 The reason a warranty on a used car communicates credible information is because:Answer  Everyone offers one  It indicates the car is of below average quality  Only those cars that are of better than average quality will be warranted  It indicates the car is of average quality

Question 29 Marginal product is:Answer  The extra output associated with hiring an extra worker  The average output associated with the total number of workers hired  The total output associated with hiring an extra worker  The average output associated with hiring an extra worker

Question 30 Marginal labor cost is:Answer  Identical to the wage rate  Labor costs divided by the number of workers  The extra labor cost associated with hiring an extra worker  Less than the wage rate

Question 31 In a competitive labor market, it is observed that both the equilibrium wage rate and employment level have risen. One can infer that:Answer  The supply of labor has increased  The demand for labor has fallen  The supply of labor has decreased  The demand for labor has increased

Question 32 According to the textbook, after adjusting for differences in human capital stocks between union and nonunion workers, the union wage premium is approximately:Answer  50%  40%  30%  10%

Question 33
The union wage premium refers to:Answer  The dues one must pay in order to join a union  The union wage rate minus union membership dues  The deduction for union insurance  The amount by which union wages exceed nonunion wages

Question 34 A group of workers who collectively bargain with employers for higher wages and better working conditions is called a(n):Answer  Labor monopsony  Labor union  Labor collective  Open shop

Question 35 Food stamps and Medicaid are examples of:Answer  Cash transfers  In-kind transfers  Welfare programs that have been eliminated  Programs created by the New Deal

Question 36 One difficulty with the exploitation view of workplace injuries is that in order for it to be successful overtime, firms must:Answer  Maximize profit  Act independently  Act collusively  Encourage worker mobility

Question 37 The growth of lawsuits seeking compensation from firms when a worker is injured should serve to:Answer  Simply line the pockets of opportunistic lawyers  Increase the worker's incentive to get injured  Increase the firm's incentive to improve safety  Encourage outrageous settlements

Question 38 The major characteristic of a health maintenance organization (HMO) is:Answer  Emphasis on acute medical treatment  Medical treatment is provided for a fixed annual payment  Freedom to see nonmember physicians  A lack of profit maximization motives

Question 39 The growth of medical insurance in general and first-dollar coverage specifically has reduced the marginal cost of treatment to the consumer. Therefore, the current level of medical treatment in the United States is:Answer  Greater than the efficient level  Equal to the efficient level  Less than the efficient level  Less than or equal to the efficient level

Question 40 The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is:Answer  Nonpayment of the tax  Establishing the optimal size of the tax  That it works only in theory  That it would cause prices to rise

Question 41 If workers' compensation premiums accurately reflected the social costs of workplace injuries, then:Answer  Many firms would be forced out of business  The premium would function like a tax on injuries  Injury rates would rise  Firms would still exploit workers

Question 42 Safety in the workplace is overseen by the:Answer  Occupational Safety and Health Administration (OSHA)  Department of Labor (DOL)  World Health Organization (WHO)  International Labor Organization (ILO)

Question 43 If it's impossible or highly costly to prevent consumers from consuming a good when they have not paid for it, the good would be classified as a __________ good.Answer  nonexcludable  pure public  private  common

Question 44
A tax that results in a larger fraction of income being paid in taxes as income rises is a ________ tax.Answer  regressive  head  progressive  proportional

Question 45 National Public Radio (NPR) and the Public Broadcasting Service (PBS) rely, in part, on which of the following private methods of raising revenues?Answer  Scrambling their signal to exclude nonpayers  Donations from private citizens and corporations  Contracting with private firms  Lobbying Congress for additional tax revenues

Question 46 Yellowstone National Park is a jointly consumed good in the sense that:Answer  The size and beauty of the park is available for all visitors  Typically only families visit the park  While the government owns the park, private firms provide the lodgings  All taxpayers pay for its upkeep even if they don't visit the park

Question 47 The problems of externalities and poorly formed property rights are:Answer  Minor in modern economies  Additional rationales for the existence of government  Better solved by private rather than government action  Easily solved by individuals


Question 48 Radio and broadcast television are examples of:Answer  Collective goods  Pure public goods provided by the government  Rival yet nonexcludable goods  Pure public goods provided by private firms

Question 49 The best example of a pure public good is:Answer  Cable TV  A national park  National defense  Education

Question 50 Government subsidizes education because:Answer  It is a pure public good  Private firms will not provide education  Of custom and tradition  Education is thought to have positive externalities