Questions and Answers of Survey Of Economics

Which of the following statements is true?a. A monopsony is the only employer of a factor of production.b. A monopsony will pay workers a higher wage and employ fewer workers than a competitive
How are the professional sports leagues like a cartel?
A monopolistically competitive firm will:a. Maximize profits by producing where MR = MC.b. Not likely earn an economic profit in the long run.c. Shut down if price is less than average variable
What kind of agreements may cartels work out to reduce competition among themselves?
A monopolistically competitive market is characterized by:a. Many small sellers selling a differentiated product.b. A single seller of a product that has few suitable substitutes.c. Very strong
How can cartels sow the seeds of their own destruction?
If a company charges different prices to different customers as a result of differences in costs associated with providing the product to these different customers, then is that price discrimination?
Why don’t monopolists charge the highest possible price market demand will bear?
How can a monopoly maintain its single-seller status?
What evidence suggests that some government regulation may reduce competition in practice?
Why does a monopolist produce less and charge a higher price compared to a competitive market?
One of the necessary conditions for price discrimination to occur is that:a. Buyers in different markets have different elasticities of demand.b. The demand curve is upward sloping.c. Buyers must
A monopoly:a. Faces the market demand curve that is downward sloping.b. Has a marginal revenue curve that slopes downward and lies below its demand curve.c. Will maximize profits by producing an
How long can a monopoly earn economic profits?
A monopoly will price its product:a. Where total revenue is maximized.b. Where total costs are minimized.c. At that point on the market demand curve corresponding to an output level in which
Can a monopoly lose money?
A monopolized market is characterized by:a. A sole seller of a product for which there are few suitable substitutes.b. Very strong barriers to entry.c. A single firm facing the market demand
If a competitive industry expands and higher wages must be paid to attract more workers, then what will the long-run supply curve for this industry look like?
Which of the following is true of a perfectly competitive market?a. If economic profits are earned, then the price will fall over time.b. In long-run equilibrium, P = MR = SRMC = SRATC = LRAC.c. A
If a competitive industry is currently losing money, what can be expected to happen to the number of sellers, the price of the product, the volume of output and losses in this industry over time?
If a competitive firm is losing money, then:a. It should always shut down.b. It should shut down if losses are greater than total fixed costs.c. It should shut down if total fixed costs are
If a firm is producing where MR = MC, and at that output level TR = $4,500, TC = $5,000, and TVC = $4,000 per week, is the firm making or losing money? How much? Should the firm shut down?
The profit maximizing, or loss minimizing quantity of output for any firm to produce exists at that output level at which:a. Total revenue is maximized.b. Total cost is minimized.c. Marginal cost
If a firm has TFC = $2,000 per day, and is currently losing $1,500 per day, should the firm shut down?
Which of the following is true of a perfectly competitive firm?a. The firm is a price maker.b. If the firm wishes to maximize profits, it will produce an output level in which total revenue equals
Perfectly competitive markets are characterized by:a. A small number of very large producers.b. Very strong barriers to entry and exit.c. Firms selling a homogeneous product.d. All of the above.
If a profit-maximizing firm is producing an output level at which marginal revenue exceeds marginal cost, should it produce more, less or the same? Explain.
If a firm has $20,000 in total fixed costs, is producing 100 units, has average total cost equal to $240, then what is its average variable cost of production?
Why do marginal costs of production rise?
Is the “best” quantity of workers to hire where the marginal productivity of the last worker employed the greatest (which implies an output level in which the marginal cost of producing
Many people search out and purchase “bargains” at garage and yard sales. What are some implicit costs associated with this type of shopping?
If a firm enlarges its factory size and realizes higher average (per unit) costs of production, then:a. It has experienced economies of scale.b. It has experienced diseconomies of scale.c. It has
Some companies advertise: “We deal in high volume and pass our savings on to you in the form of lower prices.” How could this be?
Which of the following statements is false?a. TC = TFC + TVC.b. AVC = ATC − AFC.c. AFC = TFC/Q.d. MC equals the change in ATC divided by the change in Q.e. ATC = TC/Q.
Which of the following statements is true?a. The law of diminishing returns states that beyond some point, the marginal product of a variable resource continues to rise.b. The marginal product is
If a firm wished to minimize its cost of production, then what output level should it produce?
Which of the following statements is true?a. Economic profit equals accounting profit minus implicit costs.b. The short run is any period of time in which there is at least one fixed input.c. A
In each of the following situations, indicate who bears the biggest burden of a tax. Is the tax incidence greater for buyers or sellers?a. Given supply, demand is quite inelastic?b. Given supply,
If the price of a good increases by 10% and the quantity supplied increases by 30%, what is the elasticity of supply? What does that mean? In other words, does this product have an elastic, unitary
In each of the following situations, indicate whether the two products are substitutes or complements:a. Ec > 0.b. The price of one good increases by 12% and the quantity demanded for the other good
If the income elasticity of demand is greater than zero, does this indicate the product is normal or inferior? Why?
What would an elastic income elasticity of demand for a product mean?
If a firm wants to maximize its revenues, then what price should it charge?
If a firm wishes to increase its revenues, and the product it is selling has an inelastic demand, then should the firm increase or decrease its price?
Which of the following statements is true?a. If the income elasticity of demand is less than zero, the good is an inferior good.b. Only if the demand curve is vertical will sellers raise the
Why are convenience stores able to charge higher prices than grocery stores for some items?
If the price elasticity of demand coefficient equals 2, then:a. A 7% decrease in the price will result in a 14% decrease in the quantity demanded.b. A price decrease will increase total
If the price elasticity of demand is elastic, then:a. Ed < 1.b. Consumers are relatively not very responsive to a price increase.c. An increase in the price will increase total revenue.d.
If good X has a price elasticity of demand equal to 2 and good Y has a coefficient equal to 2.5, which has a more elastic demand? Explain.
If a good has a price elasticity of demand coefficient less than one, then:a. This good has an elastic demand.b. This good has an inelastic demand.c. A 10% increase in the price will result in a
If good X has a price elasticity of demand equal to 2 and the price increases by 10 percent, then by what percent will the quantity demanded change? Explain.
Is there a “free-rider” problem associated with public goods and services? How does government address this free-rider problem?
What are some examples of public goods and services? Should government provide more funding to enhance their production or consumption? Support your position.
Which of the following is not a market failure?a. A lack of competition in some markets.b. Prices determined in competitive markets, which consumers, as individuals, have no control over.c. The
How does government attempt to correct for a lack of competition?
A price floor (support):a. Is a legal price set by government above equilibrium.b. Causes the quantity supplied to exceed the quantity demanded.c. Creates a surplus.d. Is exemplified by a minimum
A price ceiling:a. Is a legal price set by government below equilibrium.b. Causes the quantity demanded to exceed the quantity supplied.c. Creates a shortage.d. Is exemplified by a rent
Suppose government legalized a previous good or service that used to be illegal to consume or produce (e.g., suppose marijuana is legalized), then what impact would this have on the market for this
A benefit that accrues to people other than the consumers of a good or service is aa. Positive externality.b. Negative externality.c. Price ceiling.d. Price floor.
Why has the price of most computers and other electronic products been falling over the past several years while the demand for these products has been rising at the same time?
If demand and supply both increase, but demand increases more than supply increases, then what happens to the equilibrium price and quantity?
If the price of iPhones has increased over the past year and people are buying more iPhones, is this an exception to the law of demand, or has there been a change in demand or supply that could
Assume the supply and demand curves for a good are given by the following equations: Qd = 1000 − 20P ; Qs = 5P. What is the equilibrium price and quantity?
Why do you think rock stars charge concert ticket prices below what they could otherwise charge and still sell out their performances?
If a shortage exists in a market, then:a. The price is below equilibrium.b. The quantity demand exceeds the quantity supplied.c. The price will rise in the near future.d. All of the above.
What can we say about the demand and supply curves for products, which are “free,” like matches, toothpicks, and kittens?
When the price of a good in a market is above equilibrium:a. The quantity supplied exceeds the quantity demanded.b. A surplus is observed.c. The price will fall in the near future.d. All of the
Is the price system a “just” or “fair” way to allocate products? What about products like medical care and other “essential” services?
Which of the following will increase the supply of a good?a. An increase in the price of another good, which producers could produceb. A lower price of resources used in the production of the
Who does the demanding and the supplying in the labor market? What about the loanable funds (money) market?
Which of the following is true about advertising by a firm?a. It is not always successful in increasing demand for a firm’s product.b. It can increase demand and make demand more inelastic.c. It
An oligopoly:a. And monopolistically competitive market produce less and charge higher prices than if their markets were perfectly competitive.b. Is characterized by mutual interdependence of
What happens to employment opportunities and wages paid in all noncompetitive product markets? Why?
In a non-collusive oligopoly, if one firm increased its price, what would the other firms likely do? What about a price decrease? How is this related to a kinked demand curve?
Which market structure do most real-world markets approximate?
A cartel:a. Is a group of firms formally agreeing to control the price and the output of a product.b. Has as its primary goal to reap monopoly profits by replacing competition with
What are some strategies that firms use to collude?
Which of the following statements is true?a. Marginal revenue product is the extra revenue generated to the firm from the production of one more unit of output.b. Marginal factor cost is the extra
Why does the demand for labor curve slope downward?
How would one calculate the profit an employer earns from the employment of workers?
Why does the labor supply curve slope upward?
Which of the following statements is true?a. Derived demand for labor depends on the demand for the product labor produces.b. Unions may increase demand or decrease the supply of
For each of the following, determine the impact on the demand or the supply of labor and the effect on the equilibrium wage and quantity of labor employed.a. An increase in the price of
Assume a competitive labor market has just become a monopsony. What impact will this have on workers’ wages and employment opportunities?
Some people have argued: “Any gains made by unions in the form of higher wages will create lower wages for nonunionized workers.” Leaving aside whether this is actually the case or not, what is
What is the major strategy of an inclusive (industrial) union (a union that tries to get everyone in the industry to join the union) in order to increase wages of its members?
The best number of workers for any employer to hire is that quantity at which:a. The marginal revenue product equals the marginal factor cost.b. The marginal revenue product exceeds the marginal
What is the major strategy of an exclusive (trade) union (a union that tries to limit the number of workers who can practice that trade or craft) in order to increase wages of its members?
An increase in demand:a. Results in a leftward shift of the demand curve.b. Could be caused by a decrease in the price of the good.c. Could be caused by an increase in the price of a substitute
What can you say about the price of campus parking permits if there never seems to be enough places to park even when you have a permit?
Which of the following statements is true?a. The law of demand implies that an increase in the price of a good will decrease the demand for that good.b. The law of supply implies that an increase
What are some examples of inferior products?
What might be some problems associated with economic growth?
What are the necessary ingredients for a nation to experience greater rates of economic growth, higher average standards of living, and a greater ability to compete in the global economy? That is,
A rightward (an outward) shift of a nation's production possibilities curve could be caused by:a. A decrease in technology. b. An increase in resources.c. Producing more consumer and
How could marginal analysis be applied to determine the profit-maximizing quantity of output for a firm to produce?
Given a production possibilities curve, a point:a. Inside the curve represents unemployment.b. On the curve represents full employment.c. Outside the curve is currently unattainable.d. All of the
Under what conditions would a nation be able to currently produce more of both consumer and capital products?
What is the “real” cost of purchasing a new car?
Which of the following statements is true?a. An opportunity cost is what must be given up in order to get something else.b. The three fundamental economic questions refer to What to produce? How to

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