WorksheetsEconomics Quiz
Total questions: 89
Worksheet time: 45mins
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.
The market demand curve for a monopolist is typically
unit price elastic.
downward sloping.
horizontal.
vertical.
Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves potatoes, however. If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis, her indifference curves will
slope downward
be vertical straight lines
slope upward
be horizontal straight lines
According to the neoclassical theory of distribution, the wages paid to workers
reflect the market prices of the goods those workers produce
reflect the degree of market power held by the firms that pay those wages
fail to reflect those workers' opportunity costs of leisure
are unrelated to the forces of supply and demand
Which of the following statements is correct?
When externalities cause markets to be inefficient, government action is always needed to solve the problem.
When externalities cause markets to be inefficient, private solutions can be developed to solve the problem.
When externalities cause markets to be inefficient, given enough time, externalities can be solved through normal market adjustments.
When externalities cause markets to be inefficient, there is no way to eliminate the problem of externalities in a market.
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
Patent and copyright laws are major sources of
natural monopolies.
govemment-created monopolies.
resource monopolies.
antitrust regulation.
Which of the following statements is correct?
Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of demand.
Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of profits.
Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of production possibility frontiers.
Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of wages.
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
What happens if a price floor is set above equilibrium?
No effect on the market
A shortage occurs.
A surplus occurs.
Prices drop below equilibrium.
What is the primary effect of minimum wage laws?
Increased unemployment among highly skilled workers
Increased unemployment among teen workers
Elimination of labor surplus
Reduction in wages for unskilled workers
For the purpose of protecting the environment, upon which of the following approaches do we rely more and more as time goes by?
adherence to the notion of the invisible hand
command-and-control policies
the development and enforcement of regulations
the requirement that decision makers bear the full costs of their actions
Abby sells crayons and the market for crayons is competitive. it is suggested by the expert that Abby increases her production. The expert's recommendation is based on the fact that Abby's
TR equal her total economic costs
MR > TC
MR > MC
MC > MR
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
The firm in a competitive market will make profits if it produces the quantity of output at which
MC = ATC
profit per unit is greatest
MR = TR
MR = MC
Which of the following is not a characteristic of monopolistic competition?
a large number of sellers
firms are price takers
free entry into the market
a differentiated product
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.
What happens if the price of a good decreases?
Quantity demanded increases
Quantity demanded decreases
Demand shifts left
Demand shifts right
Firms enter a competitive market when other firms in that market have
TR > FC
TR > TVC
ATC > AR
ATC < Price
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
An agreement among firms regarding price and/or production levels is called:
an antitrust market.
a free-trade arrangement.
collusion.
a Nash agreement.
If the price of a good decreases, producer surplus:
Increases
Decreases
Remains constant
Doubles
An increase in income increases demand for.
Inferior goods.
Normal goods.
Substitutes
Unrelated goods
What does the law of demand state?
When the price of a good rises, the quantity demanded increases.
When the price of a good rises, the quantity demanded decreases.
When income decreases, demand for normal goods increases.
Demand for a good is unaffected by price changes.
Market power refers to the
side effects that may occur in a market.
government regulations imposed on the sellers in a market.
ability of market participants to influence price.
forces of supply and demand in determining equilibrium price.
Which of the following is correct?
A horizontal line has an infinite slope, and a vertical line has a zero slope.
A horizontal line has a slope of 1, and a vertical line has a slope of -1.
A horizontal line has a zero slope, and a vertical line has an infinite slope.
A horizontal line has a slope of -1, and a vertical line has a slope of 1.
What can cause market failure?
Perfect competition
Externalities and market power
Government subsidies
Equal distribution of income.
New firms may enter a monopolistically competitive market when price exceeds
MR
AR
MC
ATC
The commercial airline industry consisting of Boeing and Airbus would be best described as
a perfectly competitive market
a monopolistically competitive market
an oligopoly
a monopoly
Which of the following market in which the highest output would be produced?
perfect competition
monopolistic competition
oligopoly
monopoly
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 statements is not correct?
Externalities can be corrected by self-interest.
Externalities can be corrected by moral codes and social sanctions.
Externalities can be corrected by charity.
Externalities can be corrected by normal market adjustments.
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
During Christmas holiday season, Vincom retailers often place a high price on merchandise on weekends and discount the price during the week. What do you call this price strategy?
oligopoly
price discrimination
compensating differential
marginal cost pricing
Which of the following statements is correct?
The demand curve of a competitive firm is horizontal, same as the demand curve of a monopolist
The demand curve of a competitive firm is downward sloping, while the demand curve of a monopolist is horizontal.
The demand curve of a competitive firm is horizontal, while the demand curve of a monopolist is downward sloping.
The demand curve of a competitive firm is downward sloping, same as the demand curve of a monopolist.
The marginal benefit John gets from eating a fourth cheeseburger at a picnic is:
the total benefit John gets from eating four cheeseburgers minus the total benefit John gets from eating three cheeseburgers.
the same as the total benefit of eating four cheeseburgers.
less than the marginal cost of eating the fourth cheeseburger since he chose to eat the fourth cheeseburger.
the total benefit John gets from eating five cheeseburgers minus the total benefit John gets from eating four cheeseburgers.
Refer to Figure 6-2. If the government imposes a binding price ceiling of $8.00 in this market, the result would be a:
shortage of 40.
surplus of 20.
surplus of 40.
shortage of 20.
The flatter the demand curve through a given point, the:
greater the price elasticity of demand.
smaller the price elasticity of demand.
closer the price elasticity of demand will be to the slope of the curve.
more equal the price elasticity of demand will be to the slope of the curve.
If the minimum wage exceeds the equilibrium wage, then
the quantity demanded of labor will exceed the quantity supplied
there will be no unemployment
the minimum wage will not be binding
the quantity supplied of labor will exceed the quantity demanded
An increase in supply is represented by a
supply curve move along downward and to the left.
supply curve move along upward and to the right.
supply curve shift right.
supply curve shift left.
Which of the following statements is not correct about monopoly?
Monopolists charge higher prices than competitive firms
Monopolists produce larger quantities of output than competitive firms
Consumers may benefit from monopolies if the firms invest their higher profits into something that benefits society
All of the above are not correct
Coke and hamburgers are normal goods. When the price of hamburgers falls, the substitution effect causes a
shift to a lower indifference curve and the consumer buys less coke.
shift to a higher indifference curve and the consumer buys more coke.
movement along the indifference curve and the consumer buys more coke.
movement along the indifference curve and the consumer buys less coke.
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.
Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to
increase
decrease
remain unchanged
decrease, then increase
If a tax is levied on the sellers of a product, then there will be a(n)
downward shift of the supply curve
upward shift of the supply curve
decrease in quantity supplied
increase in quantity supplied
When firms in a competitive market are unable to recoup all of their production costs due to market conditions, then
the firms will suffer long-run economic losses
the firms will suffer short-run economic losses
some firms will exit the market, causing prices to rise until the remaining firms can cover their total production costs
All of the above are correct
Which of the following is true about advertising?
provides information about products, including prices and seller locations.
has been proven to increase competition and reduce prices compared to markets without advertising.
signals quality to consumers, because advertising is expensive.
All of these are correct.
Which of the following is NOT a determinant of supply?
Technology.
Cost of production inputs.
Consumer preferences.
Government taxes and subsidies.
The fundamental source of monopoly power is
barriers to entry.
profit.
decreasing average total cost.
a product without close substitutes.
When there is a decline in the quantity demanded across all price points, this results in the demand curve being:
shift leftward.
shift rightward.
move along the demand curve.
the demand curve has become flatter.
If we see many advertising of men's shampoo products, we can conclude that
the market for those products is perfectly competitive
it costs firms very little to produce those products
those products are highly differentiated
firms are irrational in their decisions to advertise
Which of the following is not an argument made by critics of advertising?
Advertising manipulates people's tastes.
Advertising impedes competition.
Advertising promotes economies of scale.
Advertising increases the perception of product differentiation.
Which of the following is a characteristic of oligopoly or monopolistic competition, but not perfect competition?
advertising and sales promotion
profit maximization according to the MR = MC rule
firms being price takers rather than price makers
horizontal demand and marginal revenue curves
If a surplus exists in a market, then
the actual market price is above the equilibrium price, and quantity supplied is greater than quantity demanded.
the actual market price is above the equilibrium price, and quantity demanded is greater than quantity supplied.
the actual market price is below the equilibrium price, and quantity demanded is greater than quantity supplied.
the actual market price is below the equilibrium price, and quantity supplied is greater than quantity demanded.
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
In a competitive market, any buyer's or seller's actions would
have very little effect on the price on the market
have an impact on the market equilibrium price but not much on the equilibrium quantity
affect MR and AR but not price
negatively impact many firms' profits in the market
Which of the following statements best describe a price-taking firm?
If the firm raise its prices over the market rate, it would fail to sell any of its products
In order to increase revenue, the firm is incentivized to lower prices than the market rate
Only a certain quantity of the product can be sold by the firm at the market price before the market price will fall
Price-taking firms maximize profits by charging a price above MC
Which of the following statements is not correct?
Private markets tend to over-produce products with negative externalities
Private markets tend to under-produce products with positive externalities
Private parties can bargain to efficient outcomes even in the presence of externafities
Private parties are usually more successful in achieving efficient outcomes than government policies in the presence of externalities
If the government were to impose a fine of $4,000 for each unit of air-pollution released by a fertilizer plant, the policy would be considered
a subsidy
a regulation
a corrective tax
an application of the Coase theorem
Which of the following correctly lists the products in an order from most advertised to least advertised?
soft drinks, breakfast cereals, dog food
corn, dog food, communication satellites
dog food, communication satellites, corn
wheat, corn, crude oil
Which of the following firms is the closest to being a perfectly competitive firm?
Vinamilk Joint Stock Company.
Vingroup Joint Stock Company.
a hot dog vendor in the city.
the campus books
Which of the following firms is the closest to being a perfectly competitive firm?
Vinamilk Joint Stock Company.
Vingroup Joint Stock Company.
a hot dog vendor in the city.
the campus bookstore.
When buyers and sellers both are price takers, then
Boths have no influence on market price.
Boths have some influence on market price but that influence is limited.
buyers will be able to find prices lower than those determined in the market.
sellers will find it difficult to sell all they want to sell at the market price.
What causes a shift in the supply curve?
A change in the price of the good
Improved production technology.
A change in consumer preferences.
Increased competition among buyers
Which of the following factors does NOT directly affect the demand for a product?
Consumer income.
Prices of related goods.
Technology used to produce the product.
Consumer preferences.
Which of the following statements is correct?
When a consumer experiences a price increase for an inferior good, it is possible that the income effect is greater than the substitution effect, and the demand curve will be downward sloping.
When a consumer experiences a price increase for an inferior good, it is possible that the income effect is greater than the substitution effect, and the demand curve wfll be upward sloping.
When a consumer experiences a price increase for an inferior good, it is possible that the income effect is less than the substitution effect, and the demand curve will be upward sloping.
When a consumer experiences a price increase for an inferior good, it is possible that the income effect is less than the substitution effect but that the substitution effect is positive, and the demand curve will be upward sloping.
Which is an example of an inferior good?
Luxury cars
Generic brand food items
International vacations
Designer clothing
A firm can't engage in price discrimination practice if it
has perfect information about consumer demand
operates in a competitive market
faces a downward-sloping demand curve.
is regulated by the government
Which of the following is not an example of a barrier to entry?
DeBeers owns a unique plot of land in South Africa, under which lies the a large deposit of diamonds in the world
Pfizer company obtains a patent for Covid vaccine
Maria Carey obtains a copyright for her original song
An entrepreneur opens a popular new restaurant
Two goods are substitutes when a decrease in the price of one good:
decreases the demand for the other good.
decreases the quantity demanded of the other good.
increases the demand for the other good.
increases the quantity demanded of the other good.
A perfectly competitive market:
may not be in the best interests of society, whereas a monopoly market promotes general economic well-being.
promotes general economic well-being, whereas a monopoly market may not be in the best interests of society.
and a monopoly market are equally likely to promote general economic well-being.
is less likely to promote general economic well-being than a monopoly market.
The supply curve in a perfectly competitive market is
equal to the industry profits.
the horizontal sum of all the individual firms' supply curves.
the vertical sum of all the individual firms' supply curves.
always a horizontal line.
In a perfectty competitive market,
no one seller or buyer can influence the price of the product-
there are only a small number of buyers.
the goods offered by the different sellers are unique.
administrative barriers can make it difficult for firms to enter an industry.
Assume that a college student purchases only Ramen noodles and textbooks. lf Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of a textbook, by itself, will result in
a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles
a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles
an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles
an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles
Which of the following market in which the highest output would be produced?
perfect com petition
monopolistic competition
oligopoly
monopoly
Suppose DeBeer owns 80% of the world's diamonds. Which of the following reasons describes a main barrier to entry for the diamond industry?
monopoly resources
govemment regulation
the production proce
Which of the following reasons describes a main barrier to entry for the diamond industry?
monopoly resources
govemment regulation
the production process
all of the above are correct
Which of the following statements is correct?
When the price of a shirt falls, the quantity of shirts demanded falls.
When the price of a shirt falls, the quantity of shirts demanded rises.
When the price of a shirt falls, the quantity of shirts supplied rises.
When the price of a shirt falls, the demand for shirts falls.
Which of the following statements is not correct?
Government policies may improve the market's allocation of resources when negative externalities are present.
Government policies may improve the market's allocation of resources when positive externalities are present.
A positive externality is an example of a market failure.
Without government intervention, the market will tend to undersupply products that produce negative externalities.
Refer to Figure 13-9. The firm experiences economies of scale at which output levels?
(i) output levels less than M
(iii) output levels greater than N
(ii) output levels between M and N
All of (i), (ii), and (iii) are correct as long as the firm is operating in the long run.
Which of the following statements is correct?
All remedies for externalities share the goal of moving the allocation of resources toward the market equilibrium.
All remedies for externalities share the goal of moving the allocation of resources toward the socially optimal equilibrium.
All remedies for externalities share the goal of increasing the allocation of resources.
All remedies for externalities share the goal of decreasing the allocation of resources.
The forces that make market economies work are
work and leisure.
politics and religion.
supply and demand.
taxes and government spending.
Both the income and substitution effects encourage the consumer to purchase more of the good.
When the price of a normal good increases.
When the price of a normal good decreases.
When the price of an inferior good decreases.
When the price of an inferior good increases.
The income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.
When the price of a normal good increases.
When the price of a normal good decreases.
When the price of an inferior good decreases.
When the price of an inferior good increases.
The income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
When the price of a normal good increases.
When the price of a normal good decreases.
When the price of an inferior good decreases.
When the price of an inferior good increases.
Dan and Silina each like jewelry and music by the Black pink. If we were to graph an indifference curve with jewelry on the horizontal axis and cd's by the Black pink on the vertical axis, then
Dan and Silina would have identical indifference curves.
Dan's indifference curve would be higher than Silina's indifference curve-
Silina's indifference curve would be higher than Dan's indifference curve.
Because we do not know the intensity of each woman's preferences, we do not have enough information to compare their indifference curves.
Which of the following is not an example of price discrimination?
A movie theater charges a lower price for children's ticket than for adults' ticket.
A university give financal aids poor students
Pizza Hut offers a "buy three get one free" deal
An ice cream shop charges a higher price for chocolate ice cream than for coconut ice cream
Two goods are complements when a decrease in the price of one good:
decreases the quantity demanded of the other good.
decreases the demand for the other good.
increases the quantity demanded of the other good.
increases the demand for the other good.
When two goods are perfect substitutes, the marginal rate of substitution
is constant along the indifference curve
decreases as the scarcity of one good increases
increases as the scarcity of one good increases
changes to reflect the consumer's changing preferences for the goods
