Question: A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and use a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food, and $2,000 for gas and electricity. What is the sum of his implicit costs?
Answer Options: a. $52,000 b. $26,000 c. $78,000 d. $66,000 Correct Answer: b. $26,000
Question: Refer to Exhibit 11-1. What is this country’s gross domestic product?
Answer Options: a. $1,365 b. $1,205 c. $1,225 d. $1,155 Correct Answer: a. $1,365
Question: As presented in Exhibit 9-3, the long-run profit-maximizing output for the monopolistic competitive firm is:
Answer Options: a. 400 units per week b. zero units per week c. 200 units per week d. 600 units per week Correct Answer: a. 400 units per week
Question: GDP does not count:
Answer Options: a. changes in inventories b. the estimated value of homemaker production c. state and local government purchases d. spending for new homes Correct Answer: b. the estimated value of homemaker production
Question: If all firms in the industry are the same as the monopolistic competitive firm shown in this Exhibit 9-1, firms in the long run will:
Answer Options: a. experience competition from new firms that enter the industry b. experience less competition because firms will exit the industry c. earn positive economic profits d. leave the industry Correct Answer: a. experience competition from new firms that enter the industry
Question: Refer to Exhibit 11-6. Measured in terms of Year 1 prices, real GDP in Year 2 was:
Answer Options: a. 750 b. 900 c. 1,000 d. 600 Correct Answer: b. 900
Question: A firm is currently operating where the MC of the last unit produced = $84, and the MR of this unit = $70. What would you advise this firm to do?
Answer Options: a. Decrease output b. Increase output c. Stay at its current output d. Shut down Correct Answer: a. Decrease output
Question: When a product is defined as homogeneous,
Answer Options: a. buyers are indifferent as to which seller’s product they buy b. sellers are indifferent as to the quantity of the product they sell c. buyers are indifferent as to which seller’s product they buy d. sellers have an incentive to charge a price higher than the market price Correct Answer: c. buyers are indifferent as to which seller’s product they buy
Question: Because monopolists are protected by high barriers to entry, they:
Answer Options: a. may be able to earn long-run economic profits b. may be able to earn long-run economic profits c. will price their product at the highest possible price d. will not minimize the per-unit cost of producing their output Correct Answer: a. may be able to earn long-run economic profits
Question: Which of the following is true under natural monopoly?
Answer Options: a. Economies of scale exist. b. The monopolist will set price equal to marginal cost and will earn economic profits. c. Output is produced under conditions of constant cost. d. The marginal cost curve will be equal to the average cost curve. Correct Answer: a. Economies of scale exist.
Question: When Pepsi is considering a price hike, it needs to consider how Coke may react. This situation is called:
Answer Options: a. mutual interdependence. b. collusion. c. mutual interdependence. d. monopolistic competition. Correct Answer: a. mutual interdependence.
Question: Ricky and Arnie are 10-year-olds who have a lemonade stand on a busy beach and would like to practice price discrimination. They know that they are the only sellers of lemonade on the beach and that adults have a less elastic demand for lemonade than kids so they decide to sell their lemonade for $0.20 to kids and $0.50 to adults. Will their price discrimination be successful? Why or why not?
Answer Options: a. No, the kids who buy their lemonade can practice arbitrage. b. Yes, they have all of the necessary criteria to successfully price discriminate. c. No, Ricky and Arnie are price takers. d. Yes, the only necessary condition is that they know the relative elasticities of the market segments. Correct Answer: a. No, the kids who buy their lemonade can practice arbitrage.
Question: Which of the following is a distinction between perfectly competitive and monopolistic competition?
Answer Options: a. Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve. b. Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve. c. Monopolistically competitive firms can raise their price without losing sales; perfectly competitive firms must lower their price to sell more of their product. d. Perfectly competitive firms must compete with rival sellers; monopolistically competitive firms do not confront rival sellers. Correct Answer: a. Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve.
Question: Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the second employee equals:
Answer Options: a. 6 b. 6 c. 10 d. 14 Correct Answer: c. 10
Question: If a homeowner sells a kitchen table and chairs that she no longer wants to use and does not report the income earned from the sale to the Internal Revenue Service, the value of GDP is:
Answer Options: a. unaffected by this transaction because the table and chairs were already counted in GDP as final goods when the homeowner bought them new. b. understated because this transaction took place in the underground economy. c. unaffected by this transaction because the table and chairs were already counted in GDP as final goods when the homeowner bought them new. d. understated because this purchase was a nonmarket transaction. Correct Answer: a. unaffected by this transaction because the table and chairs were already counted in GDP as final goods when the homeowner bought them new.
Question: The long-run equilibrium condition for perfect competition is:
Answer Options: a. P = AVC = MR = MC. b. P = ATC = MR = MC. c. P = AFC = MR = MC. d. P = MC. Correct Answer: b. P = ATC = MR = MC.
Question: Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the labor input begins to fall with the employment of the:
Answer Options: a. first worker. b. third worker. c. fourth worker. d. second worker. Correct Answer: b. third worker.
Question: In Exhibit 8-3, what is the maximum hourly profit that GeneTech can earn from its vaccine?
Answer Options: a. $3,000 b. $4,500 c. $1,500 d. $10,500 Correct Answer: b. $4,500
Question: Based on the circular flow model, goods and services flow from:
Answer Options: a. businesses to households in product markets. b. households to businesses in product markets. c. businesses to households in factor markets. d. households to businesses in factor markets. Correct Answer: a. businesses to households in product markets.