ECO111 Full questions and answers correct 100%

ECO111 Full questions and answers correct 100% QN=1 (17143) The marginal benefit John gets from eating a fourth cheeseburger at a picnic is a. the total benefit John gets from eating four cheeseburgers minus the total benefit John gets from eating three cheeseburgers. b. the same as the total benefit of eating four cheeseburgers. c. less than the marginal cost of eating the fourth cheeseburger since he chose to eat the fourth cheeseburger. d. the total benefit John gets from eating five cheeseburgers minus the total benefit John gets from eating four cheeseburgers. - correct answer A QN=2 (17122) Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that a. trade can make everyone better off. b. people face trade-offs c. rational people think at the margin. d. people respond to incentives. - correct answer B QN=3 (17123) Senator Smart, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Smart should argue that trade can be beneficial a. only if it allows us to obtain things that we couldn't make for ourselves. b. because it allows specialization, which increases total output. c. to us if we can gain and the others involved in the trade lose. d. in only a limited number of circumstances because others are typically self-interested. - correct answer B QN=4 (17136) Economics deals primarily with the concept of a. scarcity. b. money. c. poverty. d. banking. - correct answer A QN=5 (17126) Households and economies have each of the following in common EXCEPT both a. must allocate scarce resources. b. face many decisions. c. must allocate the goods and services they produce. d. must have a central decision maker. - correct answer D QN=6 (17130) An increase in the overall level of prices in an economy is referred to as a. economic growth. b. inflation. c. monetary policy. d. supply shocks. - correct answer B QN=7 (17144) In an economy in which decisions are guided by prices and individual self-interest, there is a. the potential to achieve efficiency in production. b. a strong need for government intervention in the market. c. less efficiency than would be observed in a centrally-planned economy. d. more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy. - correct answer A QN=8 (17147) The invisible hand refers to a. how central planners made economic decisions. b. how the decisions of households and firms lead to desirable market outcomes. c. the control that large firms have over the economy. d. government regulations without which the economy would be less efficient. - correct answer B QN=9 (17131) Moira decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is a. the value of the knowledge she would have received had she attended class. b. the $30 she could have earned if she had worked at her job for those two hours. c. the value of her nap less the value of attending class. d. nothing, since she would valued sleep more than attendance at class. - correct answer A QN=10 (17138) Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"? a. Melissa can attend the concert only if she takes her sister with her. b. Greg is hungry and homeless. c. Brian must repair the tire on his bike before he can ride it to class. d. Kendra must decide between going to Colorado or Cancun for spring break. - correct answer D QN=11 (17145) Suppose a typical worker in France can produce 32 units of product in an eight-hour day, while a typical worker in Germany can produce 30 units of product in a 10-hour day. We can conclude that a. worker productivity in Germany is higher than in France. b. the standard of living will likely be higher in France than in Germany. c. productivity is 4 units per hour for the German worker and 3 units per hour for the French worker. d. there will be no difference between the standard of living in France and Germany. - correct answer B QN=12 (17146) Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of playing tennis. c. the enjoyment and exercise he would have received had he played tennis. d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis. - correct answer C QN=13 (17142) The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand for a product. c. a situation in which competition among firms becomes ruthless. d. a firm which is forced out of business because of losses. - correct answer A QN=14 (17117) In considering how to allocate its scarce resources among its various members, a household considers a. (i) each member's abilities. b. (ii) each member's efforts. c. (iii) each member's desires. d. all of (i), (ii), and (iii). - correct answer D QN=15 (17134) The term used to describe a situation in which markets do not allocate resources efficiently is a. economic meltdown. b. market failure. c. equilibrium. d. the effect of the invisible hand. - correct answer B QN=16 (17114) Communist countries worked on the premise that economic well-being could be best attained by a. a market economy. b. a strong reliance on prices and individuals' self-interests. c. a system of large privately-owned firms. d. the actions of government central planners. - correct answer D QN=17 (17120) Productivity is defined as the a. amount of goods and services produced from each unit of labor input. b. number of workers required to produce a given amount of goods and services. c. amount of labor that can be saved by replacing workers with machines. d. actual amount of effort workers put into an hour of working time. - correct answer A QN=18 (17116) To promote good economic outcomes, policymakers should strive to enact policies that a. (i) enhance productivity. b. (ii) enhance individuals' market power. c. (iii) result in a rapidly-growing quantity of money. d. All of (i), (ii), and (iii) are correct. - correct answer A QN=19 (17139) Which of the following principles is not one of the four principles of individual decision making? a. People face tradeoffs. b. Trade can make everyone better off. c. People respond to incentives. d. Rational people think at the margin. - correct answer B QN=20 (17127) Prices direct economic activity in a market economy by a. influencing the actions of buyers and sellers. b. reducing scarcity of the goods and services produced. c. eliminating the need for government intervention. d. allocating goods and services produced in the most equitable way. - correct answer A QN=21 (17121) In considering how to allocate its scarce resources among its various members, a household considers a. (i) each member's abilities. b. (ii) each member's efforts. c. (iii) each member's desires. d. all of (i), (ii), and (iii). - correct answer D QN=22 (17129) A tradeoff exists between a clean environment and a higher level of income in that a. studies show that individuals with higher levels of income actually pollute less than low-income individuals. b. to pay for pollution clean-up, the government must increase taxes which lowers income. c. laws that reduce pollution raise costs of production and reduce incomes. d. by employing individuals to clean up pollution, employment and income both rise. - correct answer C QN=23 (17113) As a result of a successful attempt by government to cut the economic pie into more equal slices, a. it is easier to cut the pie, and therefore the economy can produce a larger pie. b. those who earn more income pay less in taxes. c. the pie gets smaller, and there will be less pie overall. d. government will spend too much time cutting and it causes the economy to lose the ability to produce enough pie for everyone. - correct answer C QN=24 (17115) In a market economy, who makes the decisions that guide most economic activities? a. firms only b. households only c. firms and households d. government - correct answer C QN=25 (17128) When a society cannot produce all the goods and services people wish to have it is said that the economy is experiencing a. scarcity. b. communism. c. externalities. d. market failure. - correct answer A QN=26 (17137) The tradeoff between inflation and unemployment a. (i) implies that policies designed to reduce unemployment also reduce inflation. b. (ii) was eliminated by improved economic policies in the 1900s. c. (iii) is a long-run tradeoff, persisting for decades, according to most economists. d. None of (i), (ii), and (iii) are correct. - correct answer D QN=27 (17124) Most economists believe that an increase in the quantity of money results in a. (i) an increase in the demand for goods and services. b. (ii) lower unemployment in the short run. c. (iii) higher inflation in the long run. d. All of (i), (ii), and (iii) are correct. - correct answer D QN=28 (17125) The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. - correct answer A QN=29 (17133) If Japan chooses to engage in trade, it a. will only benefit if it trades with countries that produce goods Japan cannot produce. b. cannot benefit if it trades with less developed countries. c. should first attempt to produce the good itself. d. can benefit by trading with any other country. - correct answer D QN=30 (17118) When society requires that firms reduce pollution, there is a. a tradeoff because of reduced incomes to the firms' owners and workers. b. a tradeoff only if some firms are forced to close. c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. d. no tradeoff, since everyone benefits from reduced pollution. - correct answer A QN=31 (17135) The business cycle is measured by the a. (i) production of goods and services. b. (ii) number of people employed. c. (iii) the interest rate. d. both (i) and (ii). - correct answer D QN=32 (17140) The phenomenon of scarcity stems from the fact that a. most economies' production methods are not very good. b. in most economies, wealthy people consume disproportionate quantities of goods and services. c. governments restrict production of too many goods and services. d. resources are limited. - correct answer D QN=33 (17119) Trade between countries tends to a. reduce both competition and specialization. b. reduce competition and increase specialization. c. increase competition and reduce specialization. d. increase both competition and specialization. - correct answer D QN=34 (17141) Hue decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is a. the $24 she earns working. b. the $24 minus the enjoyment she would have received from watching the video. c. the enjoyment she would have received had she watched the video. d. nothing, since she would have received less than $24 of enjoyment from the video. - correct answer C QN=35 (17132) You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should a. compare the total cost of your education to the total benefits of your education. b. compare the total cost of your education to the benefits of staying one more semester. c. compare the cost of staying one more semester to the benefits of staying one more semester. d. compare the total benefits of your education to the cost of staying one more semester. - correct answer C QN=36 (17173) Another term for factors of production is a. inputs. b. output. c. goods. d. services. - correct answer A QN=37 (17162) An economic theory about international trade that is based on the assumption that there are only two countries trading two goods a. is useless, since the real world has many countries trading many goods. b. can be useful only in situations involving two countries and two goods. c. can be useful in the classroom, but is useless in the real world. d. can be useful in helping economists understand the complex world of international trade involving many countries and many goods. - correct answer D QN=38 (17184) Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram? a. a landowner leases land to a farmer b. a farmer hires a teenager to help with harvest c. a retired farmer sells his combine to a new farmer d. a woman buys corn for dinner - correct answer D QN=39 (17156) When two variables have a positive correlation, a. (i) when the x-variable increases, the y-variable decreases. b. (ii) when the x-variable decreases, the y-variable increases. c. (iii) when the x-variable increases, the y-variable increases. d. More than one of (i), (ii), and (iii) is correct. - correct answer C QN=40 (17164) The slope of a steep upward-sloping line will be a a. small positive number. b. large positive number. c. small negative number. d. large negative number. - correct answer B QN=41 (17160) Refer to Figure 2-1. Which arrow shows the flow of spending by households? a. A b. B c. C d. D - correct answer A QN=42 (17170) The slope of a fairly flat upward-sloping line will be a a. small positive number. b. large positive number. c. small negative number. d. large negative number. - correct answer A QN=43 (17175) Refer to Figure 2-8, Panel (a). In order to gain 2 donuts by moving from point L to point M, society must sacrifice a. (i) efficiency. b. (ii) employment. c. (iii) 4 cups of coffee. d. More than one of (i), (ii), and (iii) is correct. - correct answer C QN=44 (17149) Economists sometimes give conflicting advice because a. graduate students in economics are encouraged to argue with each other. b. economists have different values and scientific judgment. c. economists acting as scientists do not like to agree with economists acting as policy advisers. d. economics is more of a belief system than a science. - correct answer B QN=45 (17153) The scientific method is a. the use of modern technology to understand the way the world works. b. the use of controlled laboratory experiments to understand the way the world works. c. the dispassionate development and testing of theories about how the world works. d. the search for evidence to support preconceived theories about how the world works. - correct answer C QN=46 (17152) Refer to Figure 2-2. Malika works as an attorney for a corporation and is paid a salary in exchange for the legal services she performs. Jarel owns office buildings and rents his buildings to companies in exchange for rent payments. If Malika's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Jarel's income is represented by a flow of dollars a. from Box A to Box C. b. from Box C to Box A. c. from Box B to Box D. d. from Box D to Box B. - correct answer D QN=47 (17165) When economists make normative statements, they are a. speaking as scientists. b. speaking as policy advisers. c. making claims about how the world is. d. revealing that they are very liberal in their views of how the world works. - correct answer B QN=48 (17158) When economists attempt to simplify the real world and make it easier to understand they make a. assumptions. b. mistakes in judgment. c. predictions. d. evaluations. - correct answer A QN=49 (17148) Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Economics has its own language and its own way of thinking, but few other fields of study do. c. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all terms that are part of the economist's language. d. The value of the economist's language lies in its ability to provide you with a new and useful way of thinking about the world in which you live. - correct answer B QN=50 (17166) The slope of a line is equal to a. the change in the value of x divided by the change in the value of y. b. the change in the value of y divided by the change in the value of x. c. the horizontal distance divided by the vertical distance. d. the value of y divided by the value of x. - correct answer B QN=51 (17157) Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. Which of the following statements is correct? a. Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 30. b. Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. c. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. d. The technological advance reduced the amount of resources needed to produce 30 machines, so these resources could be used to produce more food. - correct answer D QN=52 (17167) Refer to Figure 2-7. In order to reach point C, the economy would have to a. (i) acquire more resources or experience a technological advance. b. (ii) begin using its available resources more efficiently than it is currently using them. c. (iii) shift resources away from the production of ribeye steaks and toward production of books. d. None of (i), (ii), and (iii) are correct; the economy will never be able to reach point C. - correct answer A QN=53 (17172) Factors of production are a. used to produce goods and services. b. also called output. c. abundant in most economies. d. assumed to be owned by firms in the circular-flow diagram. - correct answer A QN=54 (17155) The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in a. opinions and education. b. opinions and values. c. scientific judgments and education. d. scientific judgments and values. - correct answer D QN=55 (17183) A model can be accurately described as a a. theoretical abstraction with very little value. b. device that is useful only to the people who created it. c. realistic and carefully constructed theory. d. simplification of reality. - correct answer D QN=56 (17185) Refer to Table 2-2. What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300? a. 75 waffles b. 150 waffles c. 250 waffles d. 325 waffles - correct answer A QN=57 (17174) The production possibilities frontier is a graph that shows the various combinations of output that an economy a. should produce. b. wants to produce. c. can produce. d. demands. - correct answer C QN=58 (17163) Refer to Figure 2-9, Panel (a). In order to gain 2 radios by moving from point S to point T, society must sacrifice a. (i) 6 televisions. b. (ii) employment. c. (iii) efficiency. d. More than one of (i), (ii), and (iii) is correct. - correct answer A QN=59 (17176) The field of economics is traditionally divided into two broad subfields, a. national economics and international economics. b. consumer economics and producer economics. c. private sector economics and public sector economics. d. microeconomics and macroeconomics. - correct answer D QN=60 (17159) Economists use models in order to a. learn how the economy works. b. make their profession appear more precise. c. make economics difficult for students. d. make sure that all of the details of the economy are included in their analysis. - correct answer A QN=61 (17154) Positive statements are a. prescriptive. b. claims about how the world should be. c. claims about how the world is. d. made by economists speaking as policy advisers. - correct answer C QN=62 (17181) Which of the following is correct? a. A horizontal line has an infinite slope, and a vertical line has a zero slope. b. A horizontal line has a slope of 1, and a vertical line has a slope of -1. c. A horizontal line has a zero slope, and a vertical line has an infinite slope. d. A horizontal line has a slope of -1, and a vertical line has a slope of 1. - correct answer C QN=63 (17179) In the circular-flow diagram, which of the following items flows from households to firms through the markets for the factors of production? a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, rent, and profit - correct answer B QN=64 (17169) The production possibilities frontier is a graph that shows the various combinations of output that an economy a. should produce. b. wants to produce. c. can produce. d. demands. - correct answer C QN=65 (17171) In the circular-flow diagram, firms produce a. (i) goods and services using factors of production. b. (ii) output using inputs. c. (iii) factors of production using goods and services. d. Both (i) and (ii) are correct. - correct answer D QN=66 (17178) Economists build economic models by a. generating data. b. conducting controlled experiments in a lab. c. making assumptions. d. reviewing statistical forecasts. - correct answer C QN=67 (17168) In the circular-flow diagram, a. (i) firms own the factors of production. b. (ii) the factors of production are labor, land, and capital. c. (iii) the factors of production are also called "output." d. All of (i), (ii), and (iii) are correct. - correct answer B QN=68 (17161) Refer to Figure 2-2. Boxes C and D represent a. households and firms. b. the goods and services market and the factors of production market. c. the goods and services market and the financial market. d. households and government. - correct answer B QN=69 (17150) A demand curve shows the relationship a. between income and quantity demanded. b. between price and income. c. between price and quantity demanded. d. among income, price, and quantity demanded. - correct answer C QN=70 (17151) Refer to Figure 2-2. Alisha regularly buys fruits and vegetables at a grocery store. Santo regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Alisha is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care company is represented by an arrow a. from Box A to Box D. b. from Box B to Box C. c. from Box C to Box B. d. from Box D to Box A. - correct answer B QN=71 (17180) The slope of a line is equal to a. the change in the value of x divided by the change in the value of y. b. the change in the value of y divided by the change in the value of x. c. the horizontal distance divided by the vertical distance. d. the value of y divided by the value of x. - correct answer B QN=72 (17177) Factors of production are a. the mathematical calculations firms make in determining their optimal production levels. b. social and political conditions that affect production. c. the physical relationships between economic inputs and outputs. d. inputs into the production process. - correct answer D QN=73 (17182) Which of the following is not an example of a positive, as opposed to normative, statement? a. Higher gasoline prices will reduce gasoline consumption. b. Equality is more important than efficiency. c. Trade restrictions lower our standard of living. d. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money. - correct answer B QN=74 (17204) Two goods are substitutes if a decrease in the price of one good a. increases the demand for the other good. b. reduces the demand for the other good. c. reduces the quantity demanded of the other good. d. increases the quantity demanded of the other good. - correct answer B QN=75 (17209) Who gets scarce resources in a market economy? a. the government b. whoever the government decides gets them c. whoever wants them d. whoever is willing and able to pay the price - correct answer D QN=76 (17220) Refer to Table 4-2. Whose demand does not obey the law of demand? a. Audrey's b. Bob's c. Chuck's d. Dottie's - correct answer C QN=77 (17205) In a market economy, supply and demand are important because they a. (i) play a critical role in the allocation of the economy's scarce resources. b. (ii) determine how much of each good gets produced. c. (iii) can be used to predict the impact on the economy of various events and policies. d. All of (i), (ii), and (iii) are correct. - correct answer D QN=78 (17197) Which of the following statements is correct? a. Buyers determine supply and sellers determine demand. b. Buyers determine demand and sellers determine supply. c. Buyers determine both demand and supply. d. Sellers determine both demand and supply. - correct answer B QN=79 (17224) What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold? a. Price will rise. b. Price will fall. c. Price will stay exactly the same. d. The price change will be ambiguous. - correct answer D QN=80 (17206) Suppose that Carolyn receives a pay increase. We would expect a. to observe Carolyn moving down and to the right along her given demand curve. b. Carolyn's demand for inferior goods to decrease. c. Carolyn will go shopping at a clothing store worse than before. d. Carolyn's demand for normal goods to decrease. - correct answer B QN=81 (17217) If the price of a good is low, a. firms would increase profit by increasing output. b. the quantity supplied of the good could be zero. c. the supply curve for the good will shift to the left. d. firms can and should raise the price of the product. - correct answer B QN=82 (17216) Today's demand curve for gasoline could shift in response to a. (i) a change in today's price of gasoline. b. (ii) a change in the expected future price of gasoline. c. (iii) a change in the number of sellers of gasoline. d. All of (i), (ii), and (iii) are correct. - correct answer B QN=83 (17213) Which of the following events would cause the price of oranges to fall? a. (i) There is a shortage of oranges. b. (ii) An article is published in which it is claimed that tangerines cause a serious disease, and oranges and tangerines are substitutes. c. (iii) The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges. d. All of (i), (ii), and (iii) are correct. - correct answer C QN=84 (17199) The law of demand states that, other things equal, a. an increase in price causes quantity demanded to increase. b. an increase in price causes quantity demanded to decrease. c. an increase in quantity demanded causes price to increase. d. an increase in quantity demanded causes price to decrease. - correct answer B QN=85 (17186) In a market economy, supply and demand determine a. both the quantity of each good produced and the price at which it is sold. b. the quantity of each good produced, but not the price at which it is sold. c. the price at which each good is sold, but not the quantity of each good produced. d. neither the quantity of each good produced nor the price at which it is sold. - correct answer A QN=86 (17191) In a market economy, a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices. c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand. d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources. - correct answer D QN=87 (17214) Two goods are substitutes when a decrease in the price of one good a. decreases the demand for the other good. b. decreases the quantity demanded of the other good. c. increases the demand for the other good. d. increases the quantity demanded of the other good. - correct answer A QN=88 (17189) A movement downward and to the left along a supply curve is called a. an increase in supply. b. a decrease in supply. c. a decrease in quantity supplied. d. an increase in quantity supplied. - correct answer C QN=89 (17192) Which of these statements best represents the law of demand? a. When buyers' tastes for a good increase, they purchase more of the good. b. When income levels increase, buyers purchase more of most goods. c. When the price of a good decreases, buyers purchase more of the good. d. When buyers' demands for a good increase, the price of the good increases. - correct answer C QN=90 (17193) Which of the following is not held constant in a demand schedule? a. Income b. Tastes c. Price d. Expectations - correct answer C QN=91 (17215) Two goods are complements when a decrease in the price of one good a. decreases the quantity demanded of the other good. b. decreases the demand for the other good. c. increases the quantity demanded of the other good. d. increases the demand for the other good. - correct answer D QN=92 (17222) What will happen in the rice market now if sellers expect higher rice prices in the near future? a. The supply of rice will increase. b. The supply of rice will decrease. c. The supply of rice will be unaffected. d. The demand for rice will decrease. - correct answer B QN=93 (17194) Other things equal, when the price of a good falls, the a. quantity demanded of the good decreases. b. supply decreases. c. quantity supplied of the good decreases. d. demand increases. - correct answer C QN=94 (17196) In a market economy, supply and demand determine a. both the quantity of each good produced and the price at which it is sold. b. the quantity of each good produced, but not the price at which it is sold. c. the price at which each good is sold, but not the quantity of each good produced. d. neither the quantity of each good produced nor the price at which it is sold. - correct answer A QN=95 (17210) The forces that make market economies work are a. work and leisure. b. politics and religion. c. supply and demand. d. taxes and government spending. - correct answer C QN=96 (17218) An increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events, a. (i) the demand for tires decreases and the supply of tires increases. b. (ii) the demand for tires is unaffected and the supply of tires decreases. c. (iii) the demand for tires is unaffected and the supply of tires increases. d. None of (i), (ii), and (iii) is necessarily correct. - correct answer D QN=97 (17198) In a competitive market, the quantity of a product produced and the price of the product are determined by a. (i) buyers. b. (ii) sellers. c. (iii) both buyers and sellers. d. None of (i), (ii), and (iii) is correct. - correct answer C QN=98 (17190) Which of the following would most likely serve as an example of a monopoly? a. a bakery in a large city b. a bank in a large city c. a local cable television company d. a small group of corn farmers - correct answer C QN=99 (17200) In a free market, who determines how much of a good will be sold and the price at which it is sold? a. suppliers b. demanders c. the government d. suppliers and demanders together - correct answer D QN=100 (17202) Generally, the market for ice cream would be considered a. a monopolistic market. b. a competitive market. c. more organized than an auction. d. a market where individual sellers have significant pricing power. - correct answer B QN=1 (17142) The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand for a product. c. a situation in which competition among firms becomes ruthless. d. a firm which is forced out of business because of losses. - correct answer A QN=2 (17118) When society requires that firms reduce pollution, there is a. a tradeoff because of reduced incomes to the firms' owners and workers. b. a tradeoff only if some firms are forced to close. c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. d. no tradeoff, since everyone benefits from reduced pollution. - correct answer A QN=3 (17168) In the circular-flow diagram, a. (i) firms own the factors of production. b. (ii) the factors of production are labor, land, and capital. c. (iii) the factors of production are also called "output." d. All of (i), (ii), and (iii) are correct. - correct answer B QN=4 (17175) Refer to Figure 2-8, Panel (a). In order to gain 2 donuts by moving from point L to point M, society must sacrifice a. (i) efficiency. b. (ii) employment. c. (iii) 4 cups of coffee. d. More than one of (i), (ii), and (iii) is correct. - correct answer C QN=5 (17169) The production possibilities frontier is a graph that shows the various combinations of output that an economy a. should produce. b. wants to produce. c. can produce. d. demands. - correct answer C QN=6 (17194) Other things equal, when the price of a good falls, the a. quantity demanded of the good decreases. b. supply decreases. c. quantity supplied of the good decreases. d. demand increases. - correct answer C QN=7 (17197) Which of the following statements is correct? a. Buyers determine supply and sellers determine demand. b. Buyers determine demand and sellers determine supply. c. Buyers determine both demand and supply. d. Sellers determine both demand and supply. - correct answer B QN=8 (17212) A supply schedule is a table that shows the relationship between a. price and quantity supplied. b. input costs and quantity supplied. c. quantity demanded and quantity supplied. d. profit and quantity supplied. - correct answer A QN=9 (17260) If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase amounted to a. 0.67%. b. 0.83%. c. 1.20%. d. 2.70%. - correct answer C QN=10 (17263) Scenario 5-1 The supply of aged cheddar cheese is inelastic and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-1. The price elasticity of supply for aged cheddar cheese could be a. -1. b. 0. c. 0.5. d. 1.5. - correct answer C QN=11 (17292) A tax on the sellers of popcorn a. increases the size of the popcorn market. b. decreases the size of the popcorn market. c. has no effect on the size of the popcorn market. d. may increase, decrease, or have no effect on the size of the popcorn market. - correct answer B QN=12 (17279) A government-imposed maximum price at which a good can be sold is called a price a. floor. b. ceiling. c. support. d. equilibrium. - correct answer B QN=13 (17285) Refer to Table 6-1. Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market? a. 0 units b. 2 units c. 8 units d. 10 units - correct answer C QN=14 (17323) Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in the market for lemons? a. It increases. b. It decreases. c. It is not affected by this change in market forces. d. It increases very briefly then decreases. - correct answer B QN=15 (17324) Market efficiency occurs when a. total surplus is maximized. b. producer surplus is maximized. c. all resources are being used. d. consumer surplus equals producer surplus. - correct answer A QN=16 (17375) Which of the following is NOT a way of internalizing technology spillovers? a. subsidies b. patent protection c. industrial policy d. taxes - correct answer D QN=17 (17352) An externality is the impact of a. society's decisions on the well-being of society. b. a person's actions on that person's well-being. c. one person's actions on the well-being of a bystander. d. society's decisions on the poorest person in the society. - correct answer C QN=18 (17387) Suppose that electricity producers create a negative externality equal to $6 per unit. Further suppose that the government imposes a $8 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced? a. They are equal. b. The after-tax equilibrium quantity is greater than the socially optimal quantity. c. The after-tax equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question. - correct answer C QN=19 (17359) The demand curve for a product reflects the a. value of the product to consumers. b. cost of the product to consumers. c. quantity consumers are able to purchase. d. price the product will sell for in the market. - correct answer A QN=20 (17378) Which of the following policies is the government most inclined to use when faced with a positive externality? a. taxation b. permits c. subsidies d. usage fees - correct answer C QN=21 (17425) The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is a. a private good. b. a public good. c. a natural monopoly. d. a common resource. - correct answer D QN=22 (17413) Which of the following is not a public good? a. national defense b. patented technological knowledge c. general knowledge d. the elimination of poverty - correct answer B QN=23 (17408) An ice cream cone is a. excludable and rival in consumption. b. excludable and not rival in consumption. c. not excludable and rival in consumption. d. not excludable and not rival in consumption. - correct answer A QN=24 (17395) One way to eliminate the Tragedy of the Commons is to a. increase law enforcement in public areas. b. limit access to the commons. c. increase access to the commons. d. decrease taxes. - correct answer B QN=25 (17403) Which of the following quotations illustrates the Tragedy of the Commons? a. "A bird in the hand is worth two in the bush." b. "The only difference between the rich and other people is that the rich have more money." c. "What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others." d. "Anyone who is not a socialist before he is 30 has no heart; anyone who is still a socialist after he is 30 has no head." - correct answer C QN=26 (17467) Refer to Table 13-6. What is the marginal cost of producing the fifth unit of output? a. $4 b. $40 c. $50 d. $70 - correct answer D QN=27 (17438) John has decided to start his own lawn-mowing business. To purchase the mowers and the trailer to transport the mowers, John withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is John's annual opportunity cost of the financial capital that has been invested in the business? a. $30 b. $140 c. $170 d. $300 - correct answer C QN=28 (17457) Implicit costs a. do not require an outlay of money by the firm. b. do not enter into the economist's measurement of a firm's profit. c. are also known as variable costs. d. are not part of an economist's measurement of opportunity cost. - correct answer A QN=29 (17469) If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would a. slope downward. b. be horizontal. c. slope upward. d. slope downward for low output levels and upward for high output levels. - correct answer B QN=30 (17459) At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the a. average variable cost of 21 pairs of boots is $23. b. average total cost of 21 pairs of boots is $23. c. average total cost of 21 pairs of boots is $15.09. d. marginal cost of the 20th pair of boots is $20. - correct answer B QN=31 (17515) When fixed costs are ignored because they are irrelevant to a business's production decision, they are called a. explicit costs. b. implicit costs. c. sunk costs. d. opportunity costs. - correct answer C QN=32 (17516) Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost? a. The firm will continue to produce to attempt to pay fixed costs. b. The firm will immediately stop production to minimize its losses. c. The firm will stop production as soon as it is able to pay its sunk costs. d. The firm will continue to produce in the short run but will likely exit the market in the long run. - correct answer B QN=33 (17513) Refer to Figure 14-1. If the market price is P3, in the short run, the perfectly competitive firm will earn a. positive economic profits. b. negative economic profits but will try to remain open. c. negative economic profits and will shut down. d. zero economic profits. - correct answer B QN=34 (17471) Suppose that a firm operating in a perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? (i) Marginal revenue equals $4. (ii) Average revenue equals $100. (iii) Total revenue equals $1,600. a. (i) only b. (iii) only c. (i) and (iii) only d. (i), (ii), and (iii) - correct answer C QN=35 (17475) Which of the following is not a characteristic of a perfectly competitive market? a. Firms are price takers. b. Firms have difficulty entering the market. c. There are many sellers in the market. d. Goods offered for sale are largely the same. - correct answer B QN=36 (17548) Antitrust laws allow the government to a. (i) prevent mergers. b. (ii) break up companies. c. (iii) promote competition. d. All of (i), (ii), and (iii) are correct. - correct answer D QN=37 (17520) Which of the following statements is correct? a. The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. b. The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal. c. The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping. d. The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist. - correct answer C QN=38 (17543) A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it a. (i) can prevent children from buying the lower-priced tickets and selling them to adults. b. (ii) has some degree of monopoly pricing power. c. (iii) can easily distinguish between the two groups of customers. d. All of (i), (ii), and (iii) are correct. - correct answer D QN=39 (17534) Which of the following is an example of a barrier to entry? (i) A key resource is owned by a single firm. (ii) The costs of production make a single producer more efficient than a large number of producers. (iii) The government has given the existing monopoly the exclusive right to produce the good. a. (i) and (ii) b. (ii) and (iii) c. (i) only d. All of these examples are barriers to entry. - correct answer D QN=40 (17554) Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has a. less incentive to advertise than it would otherwise have. b. less market power than it would otherwise have. c. more control over the price of diamonds than it would otherwise have. d. higher profits than it would otherwise have. - correct answer B QN=41 (17568) Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as a. competitive markets. b. monopoly markets. c. monopolistically competitive markets. d. oligopoly markets. - correct answer D QN=42 (17565) Which of the following pairs illustrates the two extreme examples of market structures? a. competition and oligopoly b. competition and monopoly c. monopoly and monopolistic competition d. oligopoly and monopolistic competition - correct answer B QN=43 (17621) Table 17-19. The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul). Refer to Table 17-19. If Paul chooses Drive Straight, what will John choose to do and what will John's payoff equal? a. Turn, 5 b. Drive Straight, 0 c. Turn, 20 d. Drive Straight, 5 - correct answer A QN=44 (17632) If a certain market were a monopoly, then the monopolist would maximize its profit by producing 1,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude? a. Each duopolist produces 1,000 units of output. b. Each duopolist produces 600 units of output. c. One duopolist produces 400 units of output and the other produces 600 units of output. d. One duopolist produces 800 units of output and the other produces 400 units of output. - correct answer C QN=45 (17616) Firm A produces and sells in a market that is characterized by highly differentiated consumer goods. Firm B produces and sells industrial products. Firm C produces and sells an agricultural commodity. Which firm is likely to spend the greatest portion of its total revenue on advertising? a. Firm A b. Firm B c. Firm C d. There is no reason to believe that any one of the three firms would spend a greater portion of its total revenue on advertising than the other two firms. - correct answer A QN=46 (17645) In economics, the term capital is used to refer to a. (i) money. b. (ii) stocks and bonds. c. (iii) equipment and structures used in production. d. All of (i), (ii), and (iii) are correct. - correct answer C QN=47 (17666) The demand curve for capital a. is vertical. b. is horizontal. c. is derived from households' decisions concerning saving and spending. d. reflects the marginal productivity of capital. - correct answer D QN=48 (17706) 1. Refer to Figure 21-2. A consumer that chooses to spend all of her income could be at which point(s) on the budget constraint? a. V only b. Z only c. V, W, X, or Y only d. W, X, or Y only - correct answer D QN=49 (17696) An increase in income will cause a consumer's budget constraint to a. shift outward, parallel to its initial position. b. shift inward, parallel to its initial position. c. pivot around the horizontal axis. d. pivot around the vertical axis. - correct answer A QN=50 (17710) If the price of a good is low, a. firms would increase profit by increasing output. b. the quantity supplied of the good could be zero. c. the supply curve for the good will shift to the left. d. firms can and should raise the price of the product. - correct answer B QN=1 (17136) Economics deals primarily with the concept of a. scarcity. b. money. c. poverty. d. banking. - correct answer A QN=2 (17119) Trade between countries tends to a. reduce both competition and specialization. b. reduce competition and increase specialization. c. increase competition and reduce specialization. d. increase both competition and specialization. - correct answer D QN=3 (17152) Refer to Figure 2-2. Malika works as an attorney for a corporation and is paid a salary in exchange for the legal services she performs. Jarel owns office buildings and rents his buildings to companies in exchange for rent payments. If Malika's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Jarel's income is represented by a flow of dollars a. from Box A to Box C. b. from Box C to Box A. c. from Box B to Box D. d. from Box D to Box B. - correct answer D QN=4 (17181) Which of the following is correct? a. A horizontal line has an infinite slope, and a vertical line has a zero slope. b. A horizontal line has a slope of 1, and a vertical line has a slope of -1. c. A horizontal line has a zero slope, and a vertical line has an infinite slope. d. A horizontal line has a slope of -1, and a vertical line has a slope of 1. - correct answer C QN=5 (17149) Economists sometimes give conflicting advice because a. graduate students in economics are encouraged to argue with each other. b. economists have different values and scientific judgment. c. economists acting as scientists do not like to agree with economists acting as policy advisers. d. economics is more of a belief system than a science. - correct answer B QN=6 (17196) In a market economy, supply and demand determine a. both the quantity of each good produced and the price at which it is sold. b. the quantity of each good produced, but not the price at which it is sold. c. the price at which each good is sold, but not the quantity of each good produced. d. neither the quantity of each good produced nor the price at which it is sold. - correct answer A QN=7 (17207) 3. Refer to Figure 4-4. The graphs show the demand for cigarettes. In Panel (b), the leftward arrow is consistent with which of the following events? a. The price of cigarettes increased. b. A sales tax was placed on cigarettes. c. The prohibition of cigarette advertisements on television. d. Tobacco and marijuana are complements and the price of marijuana decreased. - correct answer C QN=8 (17251) Which of the following is not a determinant of the price elasticity of demand for a good? a. the time horizon b. the steepness or flatness of the supply curve for the good c. the definition of the market for the good d. the availability of substitutes for the good - correct answer B QN=9 (17244) Which of the following statements helps to explain why government drug interdiction increases drug-related crime? a. The direct impact is on buyers, not sellers. b. Successful drug interdiction policies reduce the demand for illegal drugs. c. Drug addicts will have an even greater need for quick cash to support their habits. d. In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs. - correct answer C QN=10 (17230) A decrease in supply, which is a leftward shift of the supply curve, will cause the largest increase in price when a. both supply and demand are inelastic. b. both supply and demand are elastic. c. demand is elastic and supply is inelastic. d. demand is inelastic and supply is elastic. - correct answer A QN=11 (17270) Price controls are usually enacted a. (i) as a means of raising revenue for public purposes. b. (ii) when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. (iii) when policymakers detect inefficiencies in a market. d. All of (i), (ii), and (iii) are correct. - correct answer B QN=12 (17269) When a tax is imposed on the sellers of a good, the supply curve shifts a. upward by the amount of the tax. b. downward by the amount of the tax. c. upward by less than the amount of the tax. d. downward by less than the amount of the tax. - correct answer A QN=13 (17295) The imposition of a binding price floor on a market causes quantity demanded to be a. (i) greater than quantity supplied. b. (ii) less than quantity supplied. c. (iii) equal to quantity supplied. d. Both (i) and (ii) are possible. - correct answer B QN=14 (17286) Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $0.60 per bottle. Which of the following statements is correct? a. (i) The effective price received by sellers is $0.40 per bottle less than it was before the tax. b. (ii) Sixty percent of the burden of the tax falls on sellers. c. (iii) This tax causes the demand curve for liquor to shift downward by $1.00 at each quantity of liquor. d. All of (i), (ii), and (iii) are correct. - correct answer A QN=15 (17281) In the housing market, rent controls cause quantity supplied to a. fall and quantity demanded to fall. b. fall and quantity demanded to rise. c. rise and quantity demanded to fall. d. rise and quantity demanded to rise. - correct answer B QN=16 (17338) Which of the following events would increase producer surplus? a. (i) Sellers' costs stay the same and the price of the good increases. b. (ii) Sellers' costs increase and the price of the good stays the same. c. (iii) Sellers' costs increase and the price of the good decreases. d. All of (i), (ii), and (iii) are correct. - correct answer A QN=17 (17306) Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is a. $150. b. $200. c. $350. d. $550. - correct answer A QN=18 (17341) In a market, the marginal buyer is the buyer a. whose willingness to pay is higher than that of all other buyers and potential buyers. b. whose willingness to pay is lower than that of all other buyers and potential buyers. c. who is willing to buy exactly one unit of the good. d. who would be the first to leave the market if the price were any higher. - correct answer D QN=19 (17329) 5. Refer to Table 7-9. The equilibrium price is a. $10.00. b. $8.00. c. $6.00. d. $4.00. - correct answer B QN=20 (17328) Raisins and milk are complementary goods. An increase in supply of raisins will a. increase consumer surplus in the market for raisins and decrease producer surplus in the market for milk. b. increase consumer surplus in the market for raisins and increase producer surplus in the market for milk. c. decrease consumer surplus in the market for raisins and increase producer surplus in the market for milk. d. decrease consumer surplus in the market for raisins and decrease producer surplus in the market for milk. - correct answer B QN=21 (17379) The best remedy for market failure is often a. a market-based solution. b. shutdown of the market. c. no government intervention. d. externalizing the externalities. - correct answer A QN=22 (17380) Which of the following is a way to address an externality problem? a. (i) command and control solution b. (ii) corrective tax c. (iii) corrective subsidy d. all of (i), (ii), and (iii). - correct answer D QN=23 (17365) Refer to Figure 10-6. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome? a. An amount equal to P' minus P. b. An amount equal to P'. c. An amount equal to P. d. An amount equal to the external cost. - correct answer D QN=24 (17356) This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized? a. P1, Q1 b. P2, Q0 c. P2, Q1 d. The optimum quantity is zero concerts as long as residents in surrounding neighborhoods are adversely affected by noise and congestion. - correct answer B QN=25 (17352) An externality is the impact of a. society's decisions on the well-being of society. b. a person's actions on that person's well-being. c. one person's actions on the well-being of a bystander. d. society's decisions on the poorest person in the society. - correct answer C QN=26 (17418) Suppose that you want to put on a fireworks display in your hometown of 1,000 people this July. The cost of the display is $6,000, and each person values the display at $5. After a month, you have only sold 50 tickets at $5 each. The result is that a. the local government should put on the display, but you should not. b. you should still put on the display, but the local government should not. c. neither you nor the local government should put on the display. d. either you or the local government should put on the display. - correct answer C QN=27 (17422) Without government intervention, public goods tend to be a. overproduced and common resources tend to be overconsumed. b. overproduced and common resources tend to be underconsumed. c. underproduced and common resources tend to be overconsumed. d. underproduced and common resources tend to be underconsumed. - correct answer C QN=28 (17398) Which of the following would be considered a private good? a. national defense b. a public beach c. local cable television service d. a bottle of natural mineral water - correct answer D QN=29 (17425) The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is a. a private good. b. a public good. c. a natural monopoly. d. a common resource. - correct answer D QN=30 (17393) When a good is excludable, a. one person's use of the good diminishes another person's ability to use it. b. people can be prevented from using the good. c. no more than one person can use the good at the same time. d. everyone will be excluded from using the good. - correct answer B QN=31 (17434) Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when the firm hires 2 workers, the total cost of production is $100. When the firm hires 3 workers, the total cost of production is $120. In addition, assume that the variable cost per unit of labor is the same regardless of the number of units of labor that are hired. What is the firm's fixed cost? a. $40 b. $60 c. $80 d. $100 - correct answer B QN=32 (17436) Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes? a. macro economics b. industrial organization c. labor economics d. monetary economics - correct answer B QN=33 (17457) Implicit costs a. do not require an outlay of money by the firm. b. do not enter into the economist's measurement of a firm's profit. c. are also known as variable costs. d. are not part of an economist's measurement of opportunity cost. - correct answer A QN=34 (17511) Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market? a. less than $2.50 b. more than $2.50 c. exactly $2.50 d. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm. - correct answer C QN=35 (17512) If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then a. (i) average revenue exceeds marginal cost. b. (ii) the firm is earning a positive profit. c. (iii) decreasing output would increase the firm's profit. d. All of (i), (ii), and (iii) are correct. - correct answer C QN=36 (17542) Refer to Table 15-5. If the monopolist faces a constant marginal cost of $2, how much output should the firm produce? a. 3 units b. 4 units c. 5 units d. 6 units - correct answer B QN=37 (17544) Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm a. must lie entirely above the average total cost curve. b. must lie entirely below the average total cost curve. c. must be upward sloping. d. does not exist. - correct answer B QN=38 (17526) When a monopolist decreases the price of its good, consumers a. continue to buy the same amount. b. buy more. c. buy less. d. may buy more or less, depending on the price elasticity of demand. - correct answer B QN=39 (17595) Refer to Figure 16-3. The firm in this figure is monopolistically competitive. It illustrates a. the shut-down case. b. a long-run economic profit. c. a short-run economic profit. d. a short-run loss. - correct answer C QN=40 (17575) Monopolistic competition is characterized by (i) efficient scale (ii) markup pricing over marginal cost (iii) deadweight loss (iv) excess capacity a. (i) and (ii) only b. (ii) and (iv) only c. (i), (ii), and (iii) only d. (ii), (iii), and (iv) only - correct answer D QN=41 (17600) Suppose that Sonny and Cher are duopolists in the music industry. In January, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By February, each singer is considering breaking the agreement. What would you expect to happen next? a. Sonny and Cher will determine that it is in each singer's best self interest to maintain the agreement. b. Sonny and Cher will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price will decrease. c. Sonny and Cher will each break the agreement. The new equilibrium quantity of songs will decrease, and the new equilibrium price will increase. d. Sonny and Cher will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase. - correct answer B QN=42 (17633) Refer to Table 17-2. Suppose there are exactly two sellers of gasoline in Pittsville: Exxoff and BQ. If Exxoff sells 300 gallons and BQ sells 400 gallons, then a. Exxoff's profit is $900 and BQ's profit is $1,200. b. Exxoff's profit is $2,100 and BQ's profit is $2,400. c. there is an excess demand for gasoline in Pittsville. d. there is an excess supply of gasoline in Pittsville. - correct answer A QN=43 (17615) In which of the following market structures is the number of sellers less than "many?" (i) monopolistic competition (ii) monopoly (iii) oligopoly a. (i) and (ii) only b. (ii) and (iii) only c. (ii) only d. In all of (i), (ii), and (iii). - correct answer B QN=44 (17604) Predatory pricing involves a firm a. colluding with another firm to restrict output and raise prices. b. selling two individual products together for a single price rather than selling each product individually at separate prices. c. temporarily cutting the price of its product to drive a competitor out of the market. d. requiring that the firm reselling its product do so at a specified price. - correct answer C QN=45 (17605) In which of the following markets are strategic interactions among firms most likely to occur? a. the market for bottled water b. the market for piano lessons c. the market for tennis rackets d. the market for corn - correct an