Reference no: EM13146362

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