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WorksheetsEconomics Quiz 2
Total questions: 26
Worksheet time: 13mins
The primary claim of defenders of advertising is that it
conveys information about firm profitability.
is psychological rather than informational.
enhances the information available to consumers.
reduces the elasticity of demand for a firm's product.
Policymakers use taxes
to raise revenue for public purposes but not to influence market outcomes
when they realize that price controls alone are insufficient to correct market inequities
both to raise revenue for public purposes and to influence market outcomes
only in those markets in which the burden of the tax falls clearly on the sellers
Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market
decreases
is unchanged
increases
may increase, decrease, or remain unchanged
Which of the following statements is not correct?
The theory of consumer choice explains how people choose between textbooks and energy drinks.
The theory of consumer choice explains how people choose between labor and leisure.
The theory of consumer choice explains how people choose between spending now and spending in the future.
The theory of consumer choice explains how people choose between price and cost
For a certain firm, the 250th unit of output that the firm produces has a marginal revenue of $20 and a marginal cost of $15. It follows that the
production of the 250th unit of output increases the firm's profit by $5.
production of the 250th unit of output increases the firm's average total cost by $15.
firm's profit-maximizing level of output is less than 250 units.
production of the 249th unit of output must increase the firm's profit by less than $5.
Product A are currently selling for $20 per unit, but the equilibrium price of product A is $13 per unit. Then,
This creates a shortage of product to exist and the market price of that product to increase.
This creates a shortage of product to exist and the market price of that product to decrease.
This creates a surplus of product to exist and the market price of that product to increase.
This creates a surplus of product to exist and the market price of that product to decrease.
The maximum price that a consumer will pay for a good is called the
cost.
willingness to pay.
variable cost.
fixed cost.
If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would
decrease by exactly $500
decrease by less than $500
decrease by more than $500
increase by an indeterminate amount
Which of the following market in which the highest output would be produced?
perfect competition
monopolistic competition
oligopoly
monopoly
Competitive firms are different from monopolies in which of the following ways? (i) Competitive firms are price takers; (ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price; (iii) Monopolies must lower their price in order to sell more, while competitive firms do not have to do so.
(i) and (ii) only
(ii) and (iii) only
(i) and (iii) only
(i), (ii), and (iii)
Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a
shift to a lower indifference curve, and the consumer buys fewer granola bars
shift to a higher indifference curve, and the consumer buys more granola bars
movement along the indifference curve, and the consumer buys fewer granola bars
movement along the indifference curve, and the consumer buys more granola bars
In the short run for a particular market, there are 200 firms. Each firm has a marginal cost of $15 when it produces 100 units of output. One point on the perfect competition market supply curve is
quantity = 100, price = $15
quantity = 200, price = $15
quantity = 20000 , price = $15
quantity = 20000 price = $7 ,500
Which of the following statements is correct?
The value of the marginal product curve is the labor demand curve for competitive, profit-maximizing firms
A competitive, profit-maximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage
By hiring labor up to the point where the value of the marginal product of labor equals the wage, the firm is producing where price equals marginal cost
All of the above are correct
Which of the following statements is correct?
Private markets fail to account for externalities because externalities don't occur in private markets.
Private markets fail to account for externalities because sellers include costs associated with externalities in the price of their product.
Private markets fail to account for externalities because decisionmakers in the market fail to include the costs of their behavior to third parties.
Private markets fail to account for externalities because the government cannot easily estimate the optimal quantity of pollution.
Hotels in Bùi Viện (Ho Chi Minh City) used to experience an average vacancy rate of about 20 percent (on an average night, 80% of the hotel rooms are full). This kind of excess capacity is of what kind of market?
monopoly
perfect competition
monopolistic competition
oligopoly
Which of the following is a characteristic of a natural monopoly?
Average cost exceeds marginal cost over large regions of output.
Increasing the number of firms increases each firm's average total cost.
One firm can supply output at a lower cost than two firms.
All of these are correct
Patent and copyright laws are major sources of
natural monopolies.
government-created monopolies.
resource monopolies.
antitrust regulation.
If the income effect counteracts the substitution effect, we know that the good in question is a(n)
complementary good
inferior good
luxury good
normal good
Minimum-wage laws dictate
the exact wage that firms must pay workers
a "ceiling wage" that firms may pay workers
both a lowest wage and a highest wage that firms may pay workers
a "floor wage" that firms may pay workers
Which of the following statements is not correct about competitive market?
firms will be operating at their efficient scale in a long run
the number of firms may be fixed in a short run
the number of firms can adjust to changing market conditions in a long run
firms will be operating at a level of output where price equals AVC in a short run
Firms enter a competitive market when other firms in that market have
TR > FC
TR > TVC
ATC > AR
ATC < Price
Kari downloads 9 songs per month when the price is $1.99 per song and 17 songs per month when the price is $0.99 per song. Kari's behavior demonstrates the law of
price.
supply.
demand.
income.
Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?
Sixty percent of the burden of the tax falls on sellers.
This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume.
The effective price received by sellers is $0.40 per bottle less than it was before the tax.
All of the above are correct
Assume all capital is owned by firms, rather than by households. Under this assumption, capital is paid according to the value of its marginal product
only if this income is transmitted to households in the form of interest
only if this income is transmitted to households in the form of dividends
only if this income is transmitted to households in the form of interest or dividends
regardless of whether this income is transmitted to households in the form of interest or dividends or whether it is kept within firms as retained earnings
Which of the following statements is not correct?
Monopolistic competition is similar to monopoly because the firms can charge a price above MC
Monopolistic competition is similar to perfect competition because both market have the same characteristic of free entry
Monopolistic competition is similar to oligopoly because both market have the same characteristic of barriers to entry
Monopolistic competition is similar to perfect competition because both market have the same characteristic of many sellers
Which of the following statements is correct?
Since air pollution creates a negative externality, social welfare will be enhanced when some, but not all air pollution is eliminated.
Since air pollution creates a negative externality, social welfare is optimal when all air pollution is eliminated.
Since air pollution creates a negative externality, governments should encourage private firms to consider only private costs.
Since air pollution creates a negative externality, the free market result maximizes social welfare.
