ECON- Final

In the United States since 1967, the share of money income received by the richest 20 percent of households has ________ and the share of income received by the lowest 20 percent of households has ________.

A. increased; decreased

B. decreased; increased

C. increased; not changed

D. not changed; decreased

E. not changed; increased

A. increased; decreased

A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $45. Which of the following is correct?

A. The firm should shut down and produce nothing.

B. The firm is employing the profit maximizing quantity of labor.−

C. Too few workers are currently employed and the firm will hire more workers.

D. Too much labor is currently employed and the firm will lay off some workers.

E. More information about the price of the product is needed to determine if the firm is hiring the profit maximizing amount of labor.

C. Too few workers are currently employed and the firm will hire more workers

A demand schedule

A. shows how the demand changes when the supply changes.

B. is a list of the quantities demanded at each different price when all other influences on buying plans remain the same.

C. shows the quantity demanded at one price.

D. shows that demand is on schedule.

E. is a graph showing a relationship between the quantity demanded and the price of a good

B. is a list of the quantities demanded at each different price when all other influences on buying plans remain the same.

Items bought by individuals to provide personal enjoyment are termed

A. consumption goods.

B. pleasure goods.

C. standard goods.

D. consumption or investment goods.

E. personal goods

A. consumption goods

Scarcity means that

A. resources are unlimited.

B. governments must make up for shortages in resources.

C. wants are greater than what we can produce with our resources.

D. choices made in self interest cannot be the same as those made in the social interest.−

E. what we can produce with our resources is greater than our material wants

C. wants are greater than what we can produce with our resources

Which of the following does NOT influence the price elasticity of demand?

A. the number of substitutes available to consumers

B. the amount by which the demand curve shifts when the price of another good changes

C. the price of the good relative to total income

D. the time period buyers have to respond to a price change

E. whether the good is a necessity or a luxury.

B. the amount by which the demand curve shifts when the price of another good changes

Because perfectly competitive firms are price takers, each firm faces a demand that is

A. unit elastic.

B. perfectly inelastic.

C. highly elastic but never is it perfectly elastic.

D. highly inelastic but never is it perfectly inelastic.

E. perfectly elastic.

E. perfectly elastic

Cynthia is an Oklahoma wheat farmer. The demand for her wheat is

A. inelastic but not perfectly inelastic.

B. perfectly elastic.

C. perfectly inelastic.

D. elastic but not perfectly elastic.

E. unit elastic.

B. perfectly elastic

Which of the following is a consumption good or service?
A. a United Parcel Service truck delivering Christmas gifts
B. a satellite dish installed by Cox Cable to download programs that are then distributed through
its cable system
C. a personal computer purchased in order to play games at home
D. the Starship, Space X's proposed human-carrying rocket
E. a United Airline ticket counter

C. a personal computer purchased in order to play games at home

The figure shows the U.S. market for wheat. With
international trade, the price of wheat in the United States
is ________ per ton and the United States ________ wheat.
A. $14; does not trade
B. $16; exports
C. $14; imports
D. $14; exports
E. $16; imports

B. $16; exports

The downward slope of a demand curve
A. shows that as the price of a good rises, consumers increase the quantity they demand.
B. indicates how the quantity demanded changes when incomes rise and the good is a normal good.
C. indicates how demand changes when the price changes and the good is a normal good.
D. represents the law of demand.
E. indicates how demand changes when incomes rise and the good is a normal good

D. represents the law of demand.

The graph shows Jeanne's budget line. She currently has a budget of $10. If Jeanne's budget increases,
A. the budget line will shift outward.
B. the budget line will become steeper.
C. the budget line will become flatter.
D. the budget line will shift in toward the origin.
E. we cannot tell what will happen to the budget line without information about the prices of coffee and smoothies

A. the budget line will shift outward.

The demand for a necessity generally is
A. very elastic.
B. inelastic.
C. infinitely elastic.
D. unit elastic.
E. unaffected by income

B. inelastic

Which of the following describes what happens to a consumer's budget line if that consumer's budget increases? The budget line
A. does not change.
B. becomes more horizontal.
C. shifts closer to the origin of the graph.
D. becomes steeper.
E. shifts farther away from the origin of the graph

E. shifts farther away from the origin of the graph

A budget line will shift outward and not change its slope if..
A. there is an increase in the consumer's budget.
B. the consumer's preferences change.
C. the price of one good changes.
D. the price of both goods increase by the same percentage.
E. None of the above shift the budget line outward.

A. there is an increase in the consumer's budget

The table to the right shows the revenue figures for a(n) ________ market because its four firm concentration ratio is ________ percent

A. perfectly competitive; 15.5

B. concentrated; 55

C. perfectly competitive; 35.5

D. uncompetitive; 55

E. competitive; 35.5

E. competitive; 35.5

The Herfindahl Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for−
A. the 50 smallest firms.
B. the 4 smallest firms.
C. all firms in the market.
D. the 50 largest firms.
E. the 4 largest firms

D. the 50 largest firms

Which of the following is correct about the United States?

A. Income is equally distributed but wealth is unequally distributed because of inheritances.

B. Both wealth and income are unequally distributed.

C. Income is equally distributed.

D. Wealth is equally distributed.

E. Both wealth and income are equally distributed

B. Both wealth and income are unequally distributed

Auto insurance companies charge a lower premium to drivers who carry a higher deductible because
A. a driver's riskiness increases as the driver's deductible increases.
B. a high deductible reveals that driver is a careful driver.
C. insurance companies are not profit maximizers.
D. insurance companies prefer that drivers carry no deductible.
E. a high deductible signals a high risk

B. a high deductible reveals that driver is a careful driver

If a firm finds itself at the point where the value of the marginal product of labor is greater than its wage rate, then the firm
A. increases sales to keep its employees busy.
B. decreases the number of workers it has hired in order to increase its profit.
C. changes its employment of workers and maximizes its profit by hiring the number of workers that makes the difference between the value of the marginal product and the wage rate as large as possible.
D. increases the number of workers it hires in order to increase its profit.
E. stops hiring more workers but does not fire any because the firm is maximizing its profit

D. increases the number of workers it hires in order to increase its profit

To encourage invention and innovation, the government provides
A. natural monopolies.
B. public franchises.
C. easily obtained ownership barriers to entry.
D. government licenses.
E. patents.

E. patents

Which of the following is the best example of a common resource?
A. national defense
B. a can of Mountain Dew
C. Yosemite national park
D. a Ford Thunderbird
E. a cable television network

C. Yosemite national park

The figure shows the market for winter jackets. In an effort to keep the nation warm, the president places a price ceiling of $100 in the market for winter jackets. Which of the following statements is true?
A. Producer surplus decreases if there is a
price ceiling.
B. After taking account of the resources
lost in search, consumer surplus
increases when the price ceiling is in
place.
C. There will be a surplus of jackets.
D. The quantity supplied of jackets is
greater that quantity demanded when
there is a price ceiling.
E. Because the price of a jacket is lowered,
consumers end up buying more jackets
with the price ceiling than without it.

A. Producer surplus decreases if there is a price ceiling

The figure shows the U.S. market for wheat. With
international trade, the United States exports ________ of wheat.
A. 400,000 tons
B. 700,000 tons
C. 500,000 tons
D. 300,000 tons
E. None of the above answers are correct
because the United States imports
wheat

A. 400,000 tons

The demand for luxury suites at basketball games is more elastic if..
A. poorer fans cannot afford luxury suites.
B. these suites are a luxury item.
C. few close substitutes exist for these suites.
D. basketball fans have little time to look for alternative suites.
E. these suites are a necessity.

B. these suites are a luxury item

The marginal cost curve is…
A. U shaped to reflect the bowed out PPF.−
B. upward sloping because marginal cost falls as more of a good or service is produced.
C. upward sloping to reflect increasing opportunity cost.
D. downward sloping to reflect the bowed out PPF.
E. downward sloping as marginal benefits increase

C. upward sloping to reflect increasing opportunity cost

Which of the following is an example of a person or firm that is most likely to have been granted a public franchise?
A. the local pizza parlor
B. the local Honda dealership
C. medical doctor
D. the local telephone company
E. taxi cab driver

D. the local telephone company

Suppose the demand for peaches from South Carolina is perfectly elastic. If the supply curve is upward sloping and a tax is imposed on peaches from South Carolina, then..
A. peach sellers pay all of the tax.
B. peach buyers and sellers evenly split the tax.
C. peach buyers pay all of the tax.
D. the government does not collect any revenue from the tax.
E. the tax does not change the equilibrium quantity of peaches

A. peach sellers pay all of the tax

A product's price elasticity of demand is likely to be greater
A. if it only has a few substitutes.
B. if consumers spend a small proportion of income on the product.
C. the less time consumers have to adjust to price changes.
D. if the product is a luxury good rather than a necessity.
E. Both answers C and D are correct

D. if the product is a luxury good rather than a necessity.

The figure shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound, the total imports of cherries to the United States from other nations equals…
A. 0 pounds.
B. 800,000 pounds.
C. 400,000 pounds.
D. 200,000 pounds.
E. 600,000 pounds

A. 0 pounds

If the wage rate exceeds the value of marginal product, a firm…
A. can increase its profit by hiring more workers.
B. is maximizing its profit.
C. can increase its profit by increasing the wage rate and increasing its employment.
D. can increase its profit by firing some workers.
E. can increase its profit by increasing the wage rate and not changing its employment

D. can increase its profit by firing some workers

Items that are purchased by individuals for their own enjoyment are called…
A. government goods and services.
B. capital goods.
C. consumption goods and services.
D. private goods.
E. exports of goods and services.

C. consumption goods and services

The figure shows the market for 2 bedroom townhomes in San Diego. If a rent ceiling is set at $1,000 per month, what is true?
A. Black market rents might be as high as $1,300 per month.
B. More townhomes are rented after the rent ceiling that before.
C. The quantity demanded of townhomes is less than the quantity supplied.
D. The quantity of townhomes demanded decreases to 100,000.
E. The quantity of townhomes supplied increases to 250,000

A. Black market rents might be as high as $1,300 per month.

If the production of a good causes an external cost, then the efficient quantity is..
A. equal to the quantity at which the marginal benefit equals marginal cost.
B. the quantity at which the marginal private benefit is greater than the marginal social benefit.
C. more than the quantity at which the marginal benefit equals the marginal cost.
D. less than the quantity at which the marginal benefit equals the marginal cost.
E. None of the above answers is correct

D. less than the quantity at which the marginal benefit equals the marginal cost

Scarcity
A. is the inability to satisfy all our wants.
B. is not something that affects very rich people.
C. used to exist everywhere but has been eliminated in advanced economies.
D. leads to higher prices.
E. applies only to people living in poverty

A. is the inability to satisfy all our wants

What would be an example of consumption good?
A. Jake buys an iPhone.
B. The local driver's license office purchases a new digital camera and printer.
C. Rhianna gets a haircut.
D. Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
E. Donald Trump purchases furniture for his office.

A. Jake buys an iPhone

Bill purchases property insurance for his office building, which includes coverage for fire damage. The policy offers premium discounts for smoke detectors, fire alarms, fire extinguishers and sprinkler systems. This is an incentive system to help avoid…
A. moral hazard.
B. adverse selection.
C. screening.
D. adverse signals.
E. None of the above answers are correct

B. adverse selection

Cigarettes are highly addictive and therefore have a very low elasticity of demand. A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

A. remain unchanged.

B. increase by less than $1.00.

C. increase by more than $2.00.

D. increase by more than $1.00 but less than $2.00.

E. increase by $2.00

D. increase by more than $1.00 but less than $2.00

The paramount goal of a firm is to
A. force its competitors into bankruptcy.
B. minimize costs.
C. maximize sales.
D. maximize total revenue.
E. maximize profit

E. maximize profit

The following table shows the market for frozen yogurt and the three people who make up the market.
If the price is $6 per serving, __________ each week.
A. the market demand is 3 servings
B. there will be a shortage of frozen yogurt
C. there will be a surplus of frozen yogurt
D. the market supply is 3 servings
E. the market demand is 7 servings

A. the market demand is 3 servings

If I order a pizza and invite my neighbors to eat it, the pizza is
A. produced by a natural monopoly.
B. either a common resource or a public good depending on whether it is overused.
C. a private good.
D. a common resource.
E. a public good because many people ate it.

C. a private good

The figure illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered. If 5 concerts are put on, then the
A. marginal external cost will be greater
than the marginal private cost.
B. marginal external cost will be greater
than the marginal social cost.
C. marginal external cost will equal the
marginal private cost.
D. marginal external cost will equal zero.
E. marginal social cost will equal the
marginal external cost.

A. marginal external cost will be greater than the marginal private cost

Life insurance companies often give applicants a physical examination to prevent
A. warranties.
B. adverse selection.
C. signaling.
D. moral hazard.
E. screening

B. adverse selection

If you consume hot dogs and hamburgers and your budget increases, while the prices of hot dogs and hamburgers do not change, then your budget line
A. shifts inward and its slope does not change.
B. rotates outward and its slope changes.
C. shifts outward and its slope does not change.
D. rotates inward and its slope changes.
E. does not change

C. shifts outward and its slope does not change

If demand for a seller's product is perfectly elastic, which of the following is true?
i. The firm will sell no output if it sets the price its product above the market price.
ii. There are many perfect substitutes for the seller's product.
iii. The firm will sell no output if it sets the price its product below the market price.

A. i and ii
B. ii and iii
C. i only
D. iii only
E. ii only

A. i and ii

Of all the characteristics that lead to income inequality, the factor with the largest impact is
A. sex.
B. age.
C. location.
D. education.
E. race.

D. education

A public good
A. can be consumed simultaneously by many people.
B. can only be consumed by one person at a time.
C. is any good provided by government.
D. is both rival and excludable.
E. is any good provided by a company owned by a member of the public.

A. can be consumed simultaneously by many people

The figure shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound, the total exports of cherries from the United States to other nations equals
A. 0 pounds.
B. 400,000 pounds.
C. 800,000 pounds.
D. 200,000 pounds.
E. 600,000 pounds

B. 400,000 pounds

"Screening" means that an auto insurance company is
A. creating an incentive for a risky driver to reveal that he or she is risky.
B. enforcing a pooling equilibrium.
C. ignoring all private information.
D. creating an incentive to eliminate moral hazard even though it reinforces the possibility of
adverse selection.
E. creating an incentive to eliminate adverse selection even though it reinforces the possibility of
moral hazard

A. creating an incentive for a risky driver to reveal that he or she is risky

When demand increases,
A. consumers are willing to buy more at any price.
B. the demand curve shifts leftward.
C. consumers buy more of the good only if its price rises.
D. consumers buy more of the good only if its price falls.
E. the price is lower at any level of quantity demanded.

A. consumers are willing to buy more at any price.

A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $75. Which of the following is correct?
A. Too few workers are currently employed and the firm will hire more workers.
B. The firm is employing the profit maximizing quantity of labor.−
C. The firm should shut down and produce nothing.
D. Too much labor is currently employed and the firm will lay off some workers.
E. More information about the price of the product is needed to determine if the firm is hiring the profit maximizing amount of labor.

D. Too much labor is currently employed and the firm will lay off some workers.

When an auto insurance company is screening, it is
A. attempting to keep its private information private.
B. ignoring the possibility of moral hazard in order to minimize adverse selection.
C. marketing its policies to customers.
D. trying to determine if a driver is an aggressive driver or a safe driver.
E. making its private information public

D. trying to determine if a driver is an aggressive driver or a safe driver.

A public good is ________ and ________.
A. nonrival; excludable
B. rival; excludable
C. rival; nonexcludable
D. cheap; available
E. nonrival; nonexcludable

E. nonrival; nonexcludable

Scarcity exists because
A. some people make bad economic decisions.
B. the costs of production are high.
C. some individuals have low income.
D. human wants exceed the resources available to satisfy them.
E. people take too much leisure time

D. human wants exceed the resources available to satisfy them

If producing a good or a service creates pollution, then..
A. at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price.
B. at the unregulated, competitive market equilibrium quantity, marginal social benefit and marginal social cost are equal.
C. an unregulated competitive market produces an efficient output.
D. the industry's supply curve includes the extra cost of pollution.
E. at the unregulated, competitive market equilibrium quantity, marginal social benefit is less than the equilibrium price

A. at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price

The marginal benefit of the first hotdog consumed is ________ the marginal benefit of the fifth hotdog consumed.
A. equal to
B. equal to 5 times
C. the inverse of
D. less than
E. greater than

E. greater than

In the production possibilities model, the vertical axis measures ________ and the horizontal axis measures ________.
A. the price of a good or service; the quantity of the good or service
B. the price of a good or service; the price of another good or service
C. people's wants; the quantity of a good or service
D. the quantity of a good or service; the quantity of another good or service
E. the quantity of a good or service; time

D. the quantity of a good or service; the quantity of another good or service

The inequality of annual income
A. cannot be compared to the amount of lifetime inequality.
B. is about the same as the amount of lifetime inequality.
C. cannot change from one year to the next.
D. overstates the amount of lifetime inequality.
E. understates the amount of lifetime inequality

D. overstates the amount of lifetime inequality

Bill is an economics professor who earns $40,000 teaching but decides to leave and fulfill his dream of catering barbecues. During his first year of barbecuing he earned total revenue of $60,000. He spent $30,000 on food and supplies. He also paid his wife $10,000 to
help serve food. The normal profit for an entrepreneur running a barbecue business is $3,000. He also rented an industrial grill/fry truck for $12,000. An accountant would conclude that Bill's profit was
A. $20,000.
B. -$2,000.
C. $40,000.
D. $30,000.
E. $8,000

E. $8,000

If the supply of automobiles becomes more inelastic, then a tax on automobiles is
A. paid more by the buyers after the change than before.
B. always paid entirely by the buyers.
C. always split evenly between the buyers and the sellers.
D. paid more by the government after the change than before.
E. paid more by the sellers after the change than before

E. paid more by the sellers after the change than before

Patents
A. decrease the incentive to innovate.
B. create economies of scale.
C. are a legal barrier to entry.
D. are prohibited in the United States.
E. remove legal barriers to entry

C. are a legal barrier to entry

When oligopolies seek to operate as a single price monopoly, the firms produce at the point where:−
A. P < ATC.
B. MR = MC.
C. P = MC.
D. MC = ATC.
E. P = MR

B. MR = MC

When production of a good results in an external cost, the unregulated competitive market equilibrium is inefficient because ________.
A. MSC = MB
B. MSC is undefined
C. MSC > MB
D. MSC = MC
E. MSC < MB

C. MSC > MB

If buyers pay more of a tax than do the sellers,
A. supply is more elastic than demand.
B. the amount of tax revenue collected by the government is almost zero.
C. demand is more elastic than supply.
D. the equilibrium price paid by buyers rises by less than half the amount of the tax.
E. None of the above answers is correct

A. supply is more elastic than demand

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis. As the country moves along the frontier closer to the horizontal axis,

A. more shoes are produced.

B. more jeans are produced.

C. free lunches occur.

D. more tradeoffs occur.

E. the country eventually chooses an unattainable point.

A. more shoes are produced

Because human wants are insatiable and unlimited while available resources are limited, people are said to face the problem of
A. scarcity.
B. social interest versus self interest.−
C. microeconomics.
D. macroeconomics.
E. why to produce.

A. scarcity

If the Herfindahl Hirschman Index in the market for single use cameras equals 10,000 , then the single use camera industry is best characterized as − − −
A. perfect competition.
B. either a monopoly or monopolistic competition.
C. a monopoly.
D. an oligopoly.
E. monopolistic competition.

C. a monopoly.

Nadir and Nina consume the same goods. If Nadir has more income than Nina, then Nina's budget line will

A. lie to the right of Nadir's budget line.

B. be steeper than Nadir's budget line.

C. be flatter than Nadir's budget line.

D. lie to the left of Nadir's budget line.

E. More information is needed to determine how Nina's and Nadir's budget lines compare.

D. lie to the left of Nadir's budget line

The marginal cost of a good or service
A. graphs as a positively sloped curve, so it cannot be derived from the production possibilities frontier, which is downward sloping.
B. decreases as more of the good or service is produced.
C. can be calculated from the marginal benefit of that good or service.
D. can be derived from the production possibilities frontier.
E. None of the above answers are correct

D. can be derived from the production possibilities frontier.

The Herfindahl Hirschman Index is the ________ of the percentage market share of each firm summed over the largest 50 firms in a market.−
A. square
B. sum
C. cube
D. negative
E. square root

A. square

Which of the following is NOT correct about patents?

A. Patents encourage invention of new products.

B. Patents enable a firm to be a permanent monopoly.

C. A patent is a barrier to entry.

D. Patents stimulate innovation.

E. Patents are granted to the inventor of a product or service

B. Patents enable a firm to be a permanent monopoly

Which of the following is an assumption used when drawing a production possibilities frontier?
i. Human wants and desires are limited to what is available.
ii. Only two goods are considered.
iii. The level of technology is fixed and unchanging.
A. ii and iii
B. i and iii
C. ii only
D. i, ii, and iii
E. i only

A. ii and iii

Suppose Jennifer derives $100 in marginal benefits from her first skiing trip and $80 from her third trip. Her marginal benefit from her second trip is likely to be
A. between $79 and $51.
B. more than $100.
C. between $100 and $80.
D. less than $51.
E. some amount that cannot be calculated without additional information.

C. between $100 and $80

Bill is an economics professor who earns $37,000 teaching but decides to leave and fulfill his dream of catering barbecues. During his year of barbecuing he earned total revenue of $60,000. He spent $30,000 on food and supplies. He also paid his wife $10,000 to help
serve food. The normal profit for an entrepreneur running a barbecue business is $3,000. Bill also rented an industrial grill/fry truck for $12,000. Bill had an economic
A. profit of $28,000.
B. loss of $32,000.−
C. loss of $42,000.−
D. profit of zero.
E. profit of $20,000.

B. loss of $32,000

What would be an example of consumption service?
A. Jake buys an iPhone.
B. Donald Trump purchases furniture for his office.
C. Rhianna gets a haircut.
D. The local driver's license office purchases a new digital camera and printer.
E. Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

C. Rhianna gets a haircut

For a business, opportunity cost measures
A. only the cost of labor and materials.
B. the cost of all the factors of production the firm employs.
C. only the implicit costs of the business.
D. only the explicit costs the firm must pay.
E. all of the firm's costs including its normal profit and its economic profit

B. the cost of all the factors of production the firm employs

Which of the following is the best example of a public good?

A. satellite radio

B. a Mountain Dew

C. a Ford Thunderbird

D. national defense

E. Yosemite national park

D. national defense

A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $53. Which of the following is correct?
A. The firm should shut down and produce nothing.
B. Too much labor is currently employed and the firm will lay off some workers.
C. The firm is employing the profit maximizing quantity of labor.−
D. Too few workers are currently employed and the firm will hire more workers.
E. More information about the price of the product is needed to determine if the firm is hiring the profit maximizing amount of labor.

C. The firm is employing the profit maximizing quantity of labor

The fact that firms in oligopoly are interdependent means that

A. there are too many of them for any one firm to influence price.

B. there are barriers to entry.

C. one firm's profits are affected by other firms' actions.

D. they definitely compete with each other so that the price is driven down to the monopoly level.

E. they can produce either identical or differentiated goods

C. one firm's profits are affected by other firms' actions.

To determine if a market is an oligopoly, we need to determine if

A. the firms are so few that they recognize their mutual interdependencies.

B. there are many firms in the market.

C. the firms make identical or differentiated products.

D. cartels are legal in their market.

E. the market's HHI is less than 900

A. the firms are so few that they recognize their mutual interdependencies.

If the income distribution is more unequal than the wealth distribution, then the….
A. It is not possible to draw the Lorenz curve for wealth on the same figure with the Lorenz curve for income.
B. Lorenz curve for income will be farther away from the line of equality than the Lorenz curve for wealth.
C. government has imposed a higher tax rate on income.
D. Lorenz curve for wealth will lie above the Lorenz curve for income.
E. Lorenz curve for wealth will be farther away from the line of equality than the Lorenz curve for income

B. Lorenz curve for income will be farther away from the line of equality than the Lorenz curve for wealth.

The square of the percentage market share of each firm summed over the 50 largest firms in a market is the
A. four firm concentration ratio.−
B. Herfindahl Hirschman Index.−
C. elasticity of supply value.
D. fifty firm concentration ratio.−
E. elasticity of demand value

B. Herfindahl Hirschman Index

If a perfectly competitive firm raised the price of its product,
A. its profits would increase.
B. the firm will be forced to advertise more.
C. rival firms will follow suit and raise their prices also.
D. its total revenue would rise but its total cost would rise by more.
E. the quantity of output it sells decreases to zero

E. the quantity of output it sells decreases to zero.

If a good has an external cost, the

A. marginal private cost reflects the external cost.

B. external benefit must equal the external cost.

C. unregulated competitive market outcome is efficient.

D. unregulated competitive market outcome is inefficient.

E. marginal social benefit is equal to the marginal social cost when the market is in equilibrium

D. unregulated competitive market outcome is inefficient.

Even though four firms can profitably sell hotdogs downtown, the government licenses only two firms. This market is a

A. natural duopoly.

B. legal duopoly.

C. legal monopoly.

D. natural monopoly.

E. market limited oligopoly.

B. legal duopoly

Production efficiency occurs
A. at only one point on the production possibilities frontier.
B. at all points on the production possibilities frontier.
C. at all points inside the production possibilities frontier.
D. anywhere inside or on the production possibilities frontier.
E. when the total cost of production is minimized.

B. at all points on the production possibilities frontier

If a substitute good is easy to find, then demand for a good is
A. elastic.
B. perfectly inelastic.
C. unit elastic.
D. inelastic.
E. Substitutes don't have any effect on elasticity.

A. elastic.

The phrase "a change in demand" refers to a

A. change in the quantity demanded of a good.

B. movement along the quantity curve.

C. shift of the demand curve.

D. movement along a demand curve.

E. movement along the price curve.

C. shift of the demand curve.

Scarcity requires that we

A. have the most rapid economic growth possible.

B. learn to limit our wants.

C. produce efficiently.

D. have unlimited resources.

E. make choices about what goods and services to produce

E. make choices about what goods and services to produce

A $2.00 increase in a tax on a good definitely will cause the price paid by buyers to increase by $2.00 if

A. demand is unit elastic.

B. demand is perfectly inelastic.

C. demand is elastic, but not perfectly elastic.

D. demand is inelastic, but not perfectly inelastic.

E. demand is perfectly elastic

B. demand is perfectly inelastic

In States where the government runs liquor stores, the monopoly results from

A. control of an essential resource.

B. economies of scale.

C. patents.

D. public fear.

E. legal restrictions

E. legal restrictions

If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue

A. will be less than $5.

B. will also be $5.

C. will be any amount but $5.

D. maybe either greater or less than $5.

E. will be greater than $5.

B. will also be $5

The table above gives four production possibilities for airplanes and cruise ships. In possibility A, how many resources are devoted to the production of airplanes?

A. few

B. 0

C. all

D. most

E. It is impossible to tell without more information about the prices of airplanes and cruise ships.

C. all

The figure shows the market for winter jackets. In an effort to keep the nation warm, the president places a price ceiling of $100 in the market for winter jackets. As a result, there is a

A. shortage equal to 100,000 jackets.

B. shortage equal to 150,000 jackets.

C. shortage equal to 250,000 jackets.

D. surplus equal to 150,000 jackets.

E. surplus equal to 300,000 jackets

B. shortage equal to 150,000 jackets

The figure shows the market for 2 bedroom townhomes in San Diego. If a rent ceiling is set at $1,000 per month, what is the maximum rent someone is willing to pay in the black market?

A. $1,400 per month

B. $900 per month

C. $1,000 per month

D. $1,300 per month

E. $1,100 per month

D. $1,300 per month

Collusion results when a group of firms

i. act separately to limit output, lower prices, and decrease economic profits.

ii. act together to limit output, raise prices, and increase economic profits.

iii. in the United States legally fix prices.

A. ii only

B. i only

C. ii and iii

D. iii only

E. i and iii

A. ii only

The figure shows the market for winter jackets. In an effort to keep the nation warm, the president places a price ceiling of $100 in the market for winter jackets. What would be the maximum price someone would pay in the black market?
A. $90 per jacket
B. $130 per jacket
C. $120 per jacket
D. $140 per jacket
E. $100 per jacket

B. $130 per jacket

The marginal cost curves slope upward because of the principle of
A. decreasing total benefit.
B. increasing marginal benefits.
C. decreasing marginal cost.
D. increasing marginal cost.
E. decreasing marginal benefits

D. increasing marginal cost

Costs paid in money to hire a resource is
A. an alternative use cost.−
B. an explicit cost.
C. an implicit cost.
D. economic profit.
E. normal profit

B. an explicit cost.

The figure shows the U.S. market for wheat. When there no international trade, the U.S. price of wheat is _______ per ton and the U.S. equilibrium quantity is ________ tons.
A. $16; 300,000
B. $16; 700,000
C. $14; 500,000
D. $14; 300,000
E. $16; 500,000

C. $14; 500,000