Economics_51_MCQ

Because people's wants are unlimited but resources are scarce, (Points: 1) 

1. only      the rich get everything they want 
2. choices must      be made 
3. there      will be more services produced than goods 
4. people      search for spiritual fulfillment rather than material fulfillment 

2. A resource is something that (Points: 1) 

1. is used to      produce goods and services 
2. is      provided by nature, not made by society 
3. exists      in unlimited quantities 
4. must      be produced by a firm 

3. The difference between a good and a service is that (Points: 1) 

1. a service helps satisfy unlimited      wants; a good does not 
2. a services is available in unlimited      quantities; a good is not 
3. a      good is tangible; a service is not 
4. a good is available in unlimited      quantities; a service is not 

4. The assumption that individuals act rationally implies that (Points: 1) 

1. people      implicitly calculate the costs and benefits of an activity to decide if it      is worthwhile 
2. people      only consider the costs of an activity to decide whether it is worthwhile 
3. people      undertake all those activities that yield benefits to themselves 
4. the      greater the cost of a charitable deed to a benefactor, the more likely he      or she is to perform that deed 

5. One might commit the fallacy of composition by concluding that (Points: 1) 

1. statements that are true during      prosperity are necessarily true during depression 
2. what      is good for the individual is necessarily good for the group 
3. an event that precedes another is      necessarily the cause of the latter 
4. intentions need not coincide with      actions 

6. On a given production possibilities frontier, which of the following is not assumed to be fixed? (Points: 1) 

1. the      amount of labor available 
2. the amount of capital available 
3. the level of technology 
4. the amount of land and natural      resources available production of each item 

7. When drawing a production possibilities frontier, all of the following are usually assumed except one. Which is the exception? (Points: 1) 

1. The      quantity of resources is rapidly growing. 
2. Technology is fixed. 
3. Resources can be shifted between      production of the two goods. 
4. The production possibilities frontier      is drawn for a particular time period. 
5. Resources are fully and efficiently      employed. 

8. The production possibilities frontier can be used to show all of the following except one. Which is the exception? (Points: 1) 

1. scarcity      opportunity cost 
2. the law of increasing opportunity cost      
3. efficiency 
4. the best combination of goods and      services for an economy 

9. Which economic question does the decision to produce butter instead of guns answer? (Points: 1) 

1. What to produce? 
2. How to produce? 
3. For whom to produce? 
4. Who has a comparative advantage in gun      production? 
5. Who      has an absolute advantage in butter production? 

10. Adam Smith's term, "the invisible hand," refers to (Points: 1) 

1. the hidden role of government in      setting regulations that govern trading in markets 
2. the      most capable entrepreneurs in the economy market forces 
3. the unseen work of the financial      markets that facilitates trade 
4. the role of technological change and      random events in the economy 

11. In the United States since World War II, there has been (Points: 1) 

1. a dramatic increase in the population      living in rural areas 
2. a decline in the number of women in      the labor force 
3. a decrease in the opportunity cost of      working in the home 
4. a      dramatic increase in the number of married women in the labor force 

12. Which of the following is a disadvantage of the corporation compared to the sole proprietorship? (Points: 1) 

1. limited liability 
2. difficulty raising start-up money 
3. lack of profitability 
4. corporate      income is taxed twice 

13. Externalities are defined as (Points: 1) 

1. any      transaction external to the firm costs or benefits 
2. that fall on third parties policies 
3. that firms undertake to sell products      outside the country 
4. managers' dealings with stockholders      outside the firm 

14. Gross Domestic Product is the value of all (Points: 1) 

1. goods and services produced during a      particular year 
2. goods and services sold during a      particular year 
3. final goods and services sold during a      particular year 
4. final      goods and services produced during a particular year 

15. Which of the following taxes is most clearly based on the benefits-received principle of taxation? (Points: 1) 

1. corporate income tax 
2. gasoline      tax 
3. personal income tax 
4. payroll tax 

16. The difference between normal and inferior goods is that (Points: 1) 

1. an inferior good is something that      will not be demanded until quantities of the normal good have been      exhausted 
2. an      increase in income will shift the demand curve for a normal good rightward      and the demand curve for an inferior good leftward 
3. an increase in price will shift the      demand curve for a normal good rightward and the demand curve for an      inferior good leftward 
4. if the price of a normal good      increases, individuals who buy it are poorer; for inferior goods, the      opposite is true 

17. The market supply curve of a particular product indicates the total quantities (Points: 1) 

that are actually sold during a given time period 

that buyers are willing to purchase at alternative prices 

that sellers are willing and able to offer at alternative prices 

that sellers are willing to offer for sale 

18. Which of the following would shift the supply curve for a product to the right? (Points: 1) 

1. an      improvement in the technology for producing the good 
2. the expectation of a higher price in      the near future 
3. an increase in the price of the      product 
4. an increase in the price of an      alternative good 

19. Which of the following would shift the supply curve for a good to the left? (Points: 1) 

1. an increase in the price of that good 
2. a decrease in the price of an      alternative good 
3. an improvement in technology for      producing that good 
4. an      increase in the cost of an important resource used to make that good 

20. If the demand for bicycles increases, (Points: 1) 

1. the quantity demanded decreases 
2. equilibrium price increases and      equilibrium quantity decreases 
3. equilibrium price decreases and      equilibrium quantity increases 
4. quantity      supplied increases 

21. Economists (Points: 1) 

1. believe that tastes are the major      influence on consumers' income 
2. expectations have observed that tastes      vary with changes in the number of consumers 
3. recognize      that tastes have an important impact on demand 
4. can say a great deal about the origin      of tastes 

22. The price elasticity of demand helps determine the effect of price changes on a firm's (Points: 1) 

1. property taxes 
2. profits 
3. quantity      supplied 
4. revenues 

23. Demand is unit elastic whenever (Points: 1) 

1. price      elasticity has an absolute value of 1 
2. price elasticity has an absolute value      greater than 1 
3. price elasticity has an absolute value      less than 1 
4. price elasticity is negative 

24. Along a straight-line downward-sloping demand curve, elasticity is (Points: 1) 

1. constant,      but its value cannot be determined without measurement 
2. constant and equal to an absolute      value of one 
3. greater at higher prices 
4. greater at lower prices 

25. The more broadly a good is defined, (Points: 1) 

1. the      more substitutes it has so the more elastic is its demand 
2. the fewer substitutes it has so the more      elastic is its demand 
3. the more substitutes it has so the      less elastic is its demand 
4. the fewer substitutes it has so the      less elastic is its demand 

26. If supply is perfectly elastic, the supply curve is (Points: 1) 

1. vertical 
2. horizontal      
3. any straight-line supply curve 
4. any supply curve intersecting a      perfectly elastic demand curve 

27. The most important determinant of price elasticity of supply is (Points: 1) 

1. price elasticity of demand 
2. technological conditions such as how      rapidly costs increase when a firm increases its output 
3. whether      the production process relies heavily on capital or on labor 
4. the number and closeness of available      substitutes 

28. Unlike implicit costs, explicit costs (Points: 1) 

1. reflect opportunity costs 
2. include the value of the owner's time 
3. are not included in a firm's      accounting statements 
4. are      actual cash payments 

29. The long run is a period of time (Points: 1) 

1. during which at least one resource is      fixed 
2. during      which all resources are variable 
3. during which all resources are fixed 
4. less than one year 

30. Total cost is calculated as (Points: 1) 

1. average fixed cost plus average      variable cost 
2. fixed      cost plus variable cost 
3. the additional cost of the last unit      produced 
4. marginal cost plus variable cost 

31. Economies of scale occur where (Points: 1) 

1. long-run average cost falls as new      firms enter the industry 
2. short-run average cost falls as new      firms enter the industry 
3. long-run      average cost falls as one firm expands plant size 
4. short-run average cost falls as one firm      expands plant size 

32. Diseconomies of scale at the firm level occur (Points: 1) 

1. wherever      the firm's long-run average cost curve is horizontal 
2. wherever the firm's long-run total      cost curve is horizontal 
3. where marginal cost equals marginal      revenue 
4. if a firm becomes "too      large" 

33. Which of the following is likely to be present in a perfectly competitive market? (Points: 1) 

1. patents 
2. nonprice competition such as      advertising 
3. high capital costs firms 
4. producing      identical products 

34. A perfectly competitive firm has no control over the (Points: 1) 

1. quantity of output produced 
2. quantities of inputs used 
3. price      of the product 
4. type of good produced 

35. Marginal revenue is (Points: 1) 

1. total revenue minus total cost 
2. total revenue divided by quantity of      output 
3. the      change in total revenue divided by the change in output 
4. the change in total revenue divided by      the change in the quantity of an input used 

36. A perfectly competitive firm in the short run determines its quantity supplied at various prices by using (Points: 1) 

1. the portion of its marginal cost curve      rising above its average total cost curve 
2. the      portion of its marginal cost curve rising above its average variable cost 
3. its average variable cost curve 
4. its average total cost curve 

37. A constant-cost industry is one (Points: 1) 

1. that faces constant average costs in      the short run 
2. that experiences economies of scale 
3. that experiences stable demand 
4. whose      cost curves do not change as new firms enter 

38. Economic profits in a competitive industry are signals that (Points: 1) 

1. attract      new firms into the industry 
2. prevent firms from adopting newer      technologies 
3. encourage existing firms to continue      to operate inefficiently 
4. indicate that business conditions are      improving 

39. Which of the following is true of monopoly? (Points: 1) 

1. There are no barriers to entry. 
2. The firm is a price taker. 
3. There      are no close substitutes for the product being produced. 
4. There are many firms in the industry. 

40. Which of the following describes the market structure of monopoly? (Points: 1) 

1. many firms with some control over      price, and considerable product 
2. differentiation      a single firm producing all of the output for the industry 
3. many firms with no control over price,      producing identical products with no differentiation 
4. a few firms with no control over      price, producing highly differentiated products 

41. A natural monopoly results when a firm has (Points: 1) 

1. a license 
2. a patent 
3. official approval to produce a product      
4. decreasing      average costs over the range of market demand 

42. A monopolist (Points: 1) 

1. can charge whatever price it wants 
2. charges more than almost any consumer      is willing to pay 
3. is      constrained by marginal cost in setting price 
4. is constrained by demand in setting      price 

43. If a nondiscriminating monopolist is operating at an output level where price equals average total cost, we can conclude that (Points: 1) 

1. economic profit is $0 
2. the firm is not maximizing profit 
3. the      firm should go out of business in the long run 
4. the firm is not earning its normal      profit 

44. The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that (Points: 1) 

1. demand      for the monopolist's output is inelastic 
2. there are no barriers to entry in      perfect competition 
3. demand for the monopolist's output is      elastic 
4. perfectly competitive firms have      opportunity costs 

45. A firm will only earn normal profit in the long run (Points: 1) 

1. if firms can freely enter or leave the      market 
2. if firms do not try to maximize profit      
3. only      if the industry is perfectly competitive 
4. whenever products are not      differentiated 

46. Compared to a firm in perfect competition, the monopolistically competitive firm tends to (Points: 1) 

1. produce      less and charge a higher price 
2. produce less and charge a lower price 
3. produce more and charge a lower price 
4. produce more and charge a higher price      

47. It is harder to explain the behavior of firms in oligopoly than in other market structures because in oligopoly (Points: 1) 

1. the firms act independently of each      other 
2. firms      base their decisions on what their rivals do 
3. only differentiated products are      produced 
4. only homogeneous products are produced      

48. Collusion occurs when (Points: 1) 

1. a firm chooses a level of output to      maximize its own profit 
2. firms      get together to maximize joint profits 
3. firms refuse to follow their price      leaders 
4. firms petition their U.S.      senators for favors 

49. The term strategy in terms of game theory refers to (Points: 1) 

1. the      relationship between price and marginal cost 
2. the relationship between individual      firm demand curves and the market demand curve 
3. each firm's game plan in making      decisions 
4. the interrelationship between price      and marginal revenue 

50. Which oligopoly model was developed to explain price wars in an industry? (Points: 1) 

1. natural oligopolies 
2. cartels price 
3. leadership      by a dominant firm 
4. game theory 

51. Resource owners will supply additional units of a resource as long as doing so (Points: 1) 

1. decreases      their opportunity cost 
2. increases their income 
3. increases their utility 
4. decreases their income taxes