Eco312
\nPage 1<\/p>\n
Question 1.1. (TCO 1) What is the economic meaning of the
\nexpression that “There is no such thing as a free lunch?” (Points :
\n3)
\n It refers to
\n“free-riders,” who do not pay for the cost of a product but who
\nreceive the benefit from it.
\n It means that
\neconomic freedom is limited by the amount of income available to the consumer.
\n It means that
\nthere is an opportunity cost when resources are used to provide
\n“free” products.
\n It indicates
\nthat products only have value because people are willing to pay for them.<\/p>\n
Question 2.2. (TCO 1) Henry wants to buy a book. The economic perspective suggests that Henry
\nwill buy the book if (Points : 3)
\n the book will
\ngive him utility.
\n his income is
\nhigh.
\n the marginal
\ncost of the book is greater than its marginal benefit.
\n the marginal
\nbenefit of the book is greater than its marginal cost.<\/p>\n
Question 3.3. (TCO 1) Which situation would most likely
\ncause a nation’s production possibilities curve to shift inward? (Points : 3)
\n The
\nconstruction of more capital goods
\n An increase in
\ndiscrimination based on race
\n An increase in
\nthe number of skilled immigrant workers
\n The destruction
\nfrom bombing and warfare in a losing military conflict<\/p>\n
Question 4.4. (TCO 1) Which expression is another way of
\nsaying “marginal benefit”? (Points : 3)
\n Benefits given
\nup
\n Unintended gain
\n Employment
\nbenefits
\n Extra benefit<\/p>\n
Question 5.5. (TCO 1) Which would not be considered as a
\ncapital resource of a business by an economist? (Points : 3)
\n A van used by a
\nmother to transport the family around
\n An office
\ncomputer used by an accountant
\n A crane used by
\na building contractor
\n A razor used by
\na barber<\/p>\n
Question 6.6. (TCO 1) Another term for capitalism is (Points
\n: 3)
\n the command
\nsystem.
\n the socialist
\neconomy.
\n the market
\nsystem.
\n the system of
\ninputs and outputs.<\/p>\n
Question 7.7. (TCO 1) Markets in which firms sell their
\noutput of goods and services are called (Points : 3)
\n resource
\nmarkets.
\n product
\nmarkets.
\n command
\nmarkets.
\n mixed markets.<\/p>\n
Question 8.8. (TCO 1) By free enterprise, we mean that
\n(Points : 3)
\n products are
\nprovided free to those who can’t afford to buy them.
\n individuals may
\nobtain resources, organize production, and sell the resulting output in any
\nlegal way they choose.
\n individual
\nproducers are free to produce whatever the government decides is needed by the
\nsociety.
\n individuals are free to buy whatever
\nproducts will satisfy their needs the most.<\/p>\n
Question 9.9. (TCO 1) Which is not one of the five
\nfundamental questions that an economy must deal with? (Points : 3)
\n How will the
\ngoods and services be produced?
\n Why should the
\ngoods and services be produced?
\n Who is to
\nreceive the goods and services produced in the economy?
\n In what ways
\nwill progress be promoted?<\/p>\n
Question 10.10. (TCO 1) A characteristic of centrally
\nplanned economies is that (Points : 3)
\n the price is
\nrelatively unimportant in allocating resources.
\n output reflects
\nthe pattern of consumer spending.
\n income is
\nfairly distributed among individuals.
\n there are many
\nincentives for innovation and hard work.<\/p>\n
Question 11.11. (TCO 2) An increase in demand means that
\n(Points : 3)
\n given supply,
\nthe price of the product will decline.
\n the demand
\ncurve has shifted to the right.
\n price has
\ndeclined and consumers therefore want to purchase more of the product.
\n the demand
\ncurve has shifted to the left.<\/p>\n
Question 12.12. (TCO 2) At the point where the demand and
\nsupply curves intersect (Points : 3)
\n the buying and
\nselling decisions of consumers and producers are inconsistent with one another.
\n the market is
\nin disequilibrium.
\n there is
\nneither a surplus nor a shortage of the product.
\n quantity
\ndemanded exceeds quantity supplied.<\/p>\n
Question 13.13. (TCO 2) If an effective price ceiling is
\nplaced on hamburgers then (Points : 3)
\n the quantity
\ndemanded will exceed the quantity supplied.
\n a black market
\nfor hamburger may evolve.
\n consumers may
\nwant government to ration hamburger.
\n all of these are likely outcomes.<\/p>\n
Question 14.14. (TCO 2) An increase in demand for oil along
\nwith a simultaneous increase in supply of oil will (Points : 3)
\n decrease price
\nand increase quantity.
\n increase price
\nand decrease quantity.
\n increase
\nquantity, but whether it increases price depends on how much each curve shifts.
\n increase price,
\nbut whether it increases quantity depends on how much each curve shifts.<\/p>\n
Question 15.15. (TCO 2) For most products, purchases tend to
\nfall with decreases in buyers’ incomes.
\nSuch products are known as (Points : 3)
\n inferior goods.
\n direct goods.
\n average goods.
\n normal goods.<\/p>\n
Question 16.16. (TCO 2) When the price of a product is
\nincreased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this
\nproduct is (Points : 3)
\n elastic.
\n inelastic.
\n cross-elastic.
\n unitary
\nelastic.<\/p>\n
Question 17.17. (TCO 2) Total revenue falls as the price of
\na good is raised, if the demand for the good is (Points : 3)
\n elastic.
\n inelastic.
\n unitary
\nelastic.
\n perfectly
\nelastic.<\/p>\n
Question 18.18. (TCO 2) You are the sales manager for a
\nsoftware company and have been informed that the price elasticity of demand for
\nyour most popular software is less than 1.
\nTo increase total revenues, you should: (Points : 3)
\n increase the
\nprice of the software.
\n decrease the
\nprice of the software.
\n hold the price
\nof the software constant.
\n increase the
\nsupply of the software.<\/p>\n
Question 19.19. (TCO 2) If the demand for a product is
\nelastic, then (Points : 3)
\n a higher tax on
\nthe product will generate more tax revenue.
\n a higher tax on
\nthe product will generate less tax revenue.
\n total revenue
\nwill decrease as price decreases.
\n total revenue
\nwill remain constant as price increases.<\/p>\n
Question 20.20. (TCO 2) Airlines charge business travelers
\nmore than leisure travelers because there is a more (Points : 3)
\n elastic supply
\nof business travel.
\n inelastic
\nsupply of business travel.
\n elastic demand
\nfor business travel.
\n inelastic
\ndemand for business travel.<\/p>\n
Question 21.21. (TCO 3) Suppose that you could prepare your
\nown tax return in 15 hours, or you could hire a tax specialist to prepare it
\nfor you in two hours. You value your
\ntime at $11 an hour. The tax specialist
\nwill charge you $55 an hour. The
\nopportunity cost of preparing your own tax return is (Points : 3)
\n $40.
\n $55.
\n $110.
\n $165.<\/p>\n
Question 22.22. (TCO 3) Economic profits are equal to
\n(Points : 3)
\n total revenues
\nminus fixed costs.
\n total revenues
\nminus the costs of raw materials.
\n total revenues
\nminus the opportunity costs of all inputs.
\n gross profit
\nminus selling and operating expenses.<\/p>\n
Question 23.23. (TCO 3) In the short run (Points : 3)
\n a firm cannot vary
\nits output level.
\n all factors of
\nproduction can be varied.
\n a firm can
\nchange its fixed inputs.
\n output is
\nraised or reduced by changing the levels of variable inputs.<\/p>\n
Question 24.24. (TCO 3) Variable costs are (Points : 3)
\n sunk costs.
\n costs that
\nchange every day.
\n costs that
\nchange with the level of production.
\n the change in
\ntotal cost due to the production of an additional unit of output.<\/p>\n
Question 25.25. (TCO 3) At an output of 20,000 units per
\nyear, a firm’s variable costs are $80,000 and its average fixed costs are
\n$3. The total costs per year for the
\nfirm are: (Points : 3)
\n $80,000.
\n $100,000.
\n $140,000.
\n $240,000.<\/p>\n
Question 26.26. (TCO 3) If you know that total fixed cost is
\n$200, total variable cost is $600, and total product is four units, then
\naverage total cost must be: (Points : 3)
\n $200.
\n $250.
\n $800.
\n $3200.<\/p>\n
Page 2<\/p>\n
Question 1.1. (TCO 3) In which market model would there be a
\nunique product for which there are no close substitutes? (Points : 3)
\n Monopolistic
\ncompetition
\n Pure
\ncompetition
\n Pure monopoly
\n Oligopoly<\/p>\n
Question 2.2. (TCO 3) Local electric or gas utility
\ncompanies mostly operate in which market model? (Points : 3)
\n Monopolistic
\ncompetition
\n Pure
\ncompetition
\n Pure monopoly
\n Oligopoly<\/p>\n
Question 3.3. (TCO 3) The production of agricultural
\nproducts such as wheat or corn would best be described by which market model?
\n(Points : 3)
\n Monopolistic
\ncompetition
\n Pure competition
\n Pure monopoly
\n Oligopoly<\/p>\n
Question 4.4. (TCO 3) The demand curve faced by a purely
\ncompetitive firm (Points : 3)
\n has unitary
\nelasticity.
\n yields constant
\ntotal revenues even when price changes.
\n is identical to
\nthe market demand curve.
\n is the same as its marginal
\nrevenue curve.<\/p>\n
Question 5.5. (TCO 3) Let us suppose Harry’s, a local
\nsupplier of chili and pizza, has the following revenue-and-cost structure:<\/p>\n
Total Revenue $3,000 Per Week
\nTotal Variable Cost $2,000 Per Week
\nTotal Fixed Costs $2,000 Per Week
\n(Points : 3)
\n Harry’s should
\nstay open in the long run.
\n Harry’s should
\nshut down in the short run.
\n Harry’s should stay open in the
\nshort run.
\n Harry’s should
\nshut down in the short run but reopen in the long run.<\/p>\n
Question 6.6. (TCO 3) A firm should always continue to
\noperate at a loss in the short run if (Points : 3)
\n the firm will
\nshow a profit.
\n the owner
\nenjoys helping her customers.
\n it can cover its variable costs
\nand some of its fixed costs.
\n the firm cannot
\nproduce any other products more profitably.<\/p>\n
Question 7.7. (TCO 3) In pure competition, price is
\ndetermined where the industry (Points : 3)
\n demand and supply curves
\nintersect.
\n total cost is
\ngreater than total revenue.
\n demand
\nintersects the individual firm’s marginal cost curve.
\n average total
\ncost equals total variable costs.<\/p>\n
Question 8.8. (TCO 3) The classic example of a private,
\nunregulated monopoly is (Points : 3)
\n Xerox.
\n De Beers.
\n General Motors.
\n General
\nElectric.<\/p>\n
Question 9.9. (TCO 3) Barriers to entry (Points : 3)
\n usually result
\nin pure competition.
\n can result from government
\nregulation.
\n exist in
\neconomic theory but not in the real world.
\n are typically
\nthe result of wrongdoing on the part of a firm.<\/p>\n
Question 10.10. (TCO 3) The demand curve confronting a
\nnondiscriminating, pure monopolist is (Points : 3)
\n horizontal.
\n the same as the
\nindustry’s demand curve.
\n more elastic
\nthan the demand curve confronting a competitive firm.
\n derived by vertically
\nsumming the individual demand curves for the buyers.<\/p>\n
Question 11.11. (TCO 3) Which is the best example of price
\ndiscrimination? (Points : 3)
\n An airline
\ncompany charging lower fares per pound for air freight than for passengers.
\n A telephone
\ncompany charging lower rates to weekend users than weekday users.
\n A supermarket
\ncharging lower prices in its inner city store than its out-of-town store.
\n A private
\ndoctor charging higher fees to patients receiving special services than
\npatients receiving regular services.<\/p>\n
Question 12.12. (TCO 3) Monopolistic competition is
\ncharacterized by firms (Points : 3)
\n producing
\ndifferentiated products.
\n making economic
\nprofits in the long run.
\n producing at
\noptimal productive efficiency.
\n producing where
\nprice equals marginal cost.<\/p>\n
Question 13.13. (TCO 3) Assume that in a monopolistically
\ncompetitive industry, firms are earning economic profit. This situation will (Points : 3)
\n reduce the excess capacity in the industry
\nas firms expand production.
\n attract other
\nfirms to enter the industry, causing the firm’s profits to shrink.
\n cause firms to
\nstandardize their product to limit the degree of competition.
\n make the
\nindustry allocatively efficient as each firm seeks to maintain its profits.<\/p>\n
Question 14.14. (TCO 3) A unique feature of an oligopolistic
\nindustry is (Points : 3)
\n low barriers to
\nentry.
\n standardized
\nproducts.
\n diminishing
\nmarginal returns.
\n mutual
\ninterdependence.<\/p>\n
Question 15.15. (TCO 3) A low concentration ratio means that
\n(Points : 3)
\n there is a low
\nprobability of entering the industry.
\n there is a low
\nprobability of success in the industry.
\n each firm
\naccounts for a small market share of the industry.
\n each firm
\naccounts for a large market share of the industry.<\/p>\n
Question 16.16. (TCO 3) In which set of market models are
\nthere the most significant barriers to entry? (Points : 3)
\n Monopolistic
\ncompetition and pure competition
\n Monopolistic
\ncompetition and pure monopoly
\n Oligopoly and
\nmonopolistic competition
\n Oligopoly and
\npure monopoly<\/p>\n
Question 17.17. (TCO 1) Money is not an economic resource
\nbecause (Points : 3)
\n money, as such,
\ndoes not produce anything.
\n idle money
\nbalances do not earn interest income.
\n it is not
\nscarce.
\n money is not a
\nfree gift of nature.<\/p>\n
Question 18.18. (TCO 1) Refer to the diagram below which is
\nbased on the Circular Flow Model in Chapter 2.
\nArrows (1) and (2) represent<\/p>\n
diagram1
\nGraph Description<\/p>\n
(Points : 3)
\n goods and
\nresources, respectively.
\n money incomes
\nand output, respectively.
\n output and
\nmoney incomes, respectively.
\n resources and
\ngoods, respectively.<\/p>\n
Question 19.19. (TCO 2) Refer to the diagram. A decrease in demand is depicted by a
\ndiagram2
\nGraph Description<\/p>\n
(Points : 3)
\n move from Point
\nx to Point y.
\n shift from D1
\nto D2.
\n shift from D2
\nto D1.
\n move from Point
\ny to Point x.<\/p>\n
Question 20.20. (TCO 2) Refer to the information and assume
\nthe stadium capacity is 5,000. If the
\nMudhens’ management wanted a full house for the game, it would<\/p>\n
Price per Ticket<\/p>\n
Quantity Demanded<\/p>\n
$13<\/p>\n
1,000<\/p>\n
11<\/p>\n
2,000<\/p>\n
9<\/p>\n
3,000<\/p>\n
7<\/p>\n
4,000<\/p>\n
5<\/p>\n
5,000<\/p>\n
3<\/p>\n
6,000<\/p>\n
(Points : 3)
\n set price so as
\nto maximize its total revenue.
\n encourage
\nscalpers to sell their tickets for more than $7.
\n set ticket
\nprices at $5.
\n set ticket
\nprices at $9.<\/p>\n
Question 21.21. (TCO 2) Which type of goods is most
\nadversely affected by recessions? (Points : 3)
\n Goods for which
\nthe income-elasticity coefficient is relatively low or negative.
\n Goods for which
\nthe income-elasticity coefficient is relatively high and positive.
\n Goods for which
\nthe cross-elasticity coefficient is positive.
\n Goods for which
\nthe cross-elasticity coefficient is negative.<\/p>\n
Question 22.22. (TCO 3) In the figure, Curves 1, 2, 3, and 4
\nrepresent the
\ncurves figure 1
\nGraph Description<\/p>\n
(Points : 3)
\n ATC, MC, AFC,
\nand AVC curves, respectively.
\n MC, AFC, AVC,
\nand ATC curves, respectively.
\n MC, ATC, AVC,
\nand AFC curves, respectively.
\n ATC, AVC, AFC,
\nand MC curves, respectively.<\/p>\n
Question 23.23. (TCO 1) Refer to the diagram. If society is producing nine units of
\nbicycles and four units of computers and it now decides to increase computer
\noutput to six, the cost
\npoints diagram1
\nGraph Description
\n(Points : 3)
\n will be four
\nunits of bicycles.
\n will be two
\nunits of bicycles.
\n will be zero
\nbecause unemployed resources are available.
\n of doing so
\ncannot be determined from the information given.<\/p>\n
Question 24.24. (TCO 3) What type of barrier to entry was
\nused by De Beers throughout much of its history to maintain its monopoly
\nposition? (Points : 3)
\n Patent
\nprotection
\n Government
\nregulation
\n Economies of
\nscale
\n Ownership of an
\nessential resource<\/p>\n
Question 25. Question
\n:
\n(TCO 3) a.) A pure monopolist determines that at the current
\nlevel of output the marginal cost of production is $2, average variable costs
\nare $2.75, and average total costs are $2.95.
\nThe marginal revenue is $2.75.
\nWhat would you recommend that the monopolist do to maximize profits? b.) Why might a business owner keep their
\nbusiness open but let it deteriorate, rather than shut it down? Will this profitability last?Question 26. Question
\n:
\n(TCO 2) Evaluate how the following situations will affect
\nthe demand curve for iPods.<\/p>\n
(a) Income statistics show that income of 18\u00e2\u0080\u009325-year-olds
\nhave increased by 10 percent over the last year.<\/p>\n
(b) Efforts of music artists wanting greater protection of
\ntheir music result in more stringent enforcement of copyrights and the shutdown
\nof numerous illegal downloading sites.<\/p>\n
(c) Believing that it has significant control of the market
\nfor portable digital music players, Apple decides to raise the price of iPods
\nwith the goal of increasing profits.<\/p>\n
(d) The price of milk decreases.<\/p>\n","protected":false},"excerpt":{"rendered":"
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