Multiple choice questions:
1.Competitive markets for factors of production have
a. A large number of buyer and sellers
b. No single buyer or seller can affect the prices
c. Each participant is a price taker
d. All of the above
e. Only a and b
2. The demand for factor goods is
a. Direct demand
b. Derived demand
c. Upward sloping
d. Determined by the ROI of suppliers
3. The Marginal Revenue Product of Labor is
a. The additional output gotten by hiring and additional unit of labor
b. The additional input supplied by hiring an additional unit of labor
c. The additional output gotten by hiring an additional unit of labor times the additional revenue from each additional unit of output.
d. The additional cost of hiring an additional unit of labor times the additional cost of producing each additional unit of output.
4. Only when the MRPL is equal to the wage paid will the firm have
a. Hired the profit maximizing amount of labor.
b. Hired the profit minimizing amount of labor
c. Maximized its loss
d. Minimized its costs
5. Inputs or outputs are chosen so that the marginal revenue from the sale of outputs is equal to
a. The marginal costs from the purchase of inputs
b. The marginal cost of labor
c. The marginal cost of additional labor
d. The average cost of labor
6. When capital inputs are variable in the long-run, there is
a. Less elasticity of demand because firms cannot substitute capital for labor
b. No effect on elasticity of demand
c. Greater elasticity of demand because firms can substitute capital for labor
d. None of the above are true
7. A competitive factor market is in equilibrium when
a. The price of inputs equals the price of outputs.
b. The quantity of inputs equals the price of outputs
c. The price of inputs equals the quantity of outputs
d. The price of inputs equates the quantity demanded to the quantity supplied
8. In a perfectly competitive market
a. Workers are paid according to their output
b. All workers are paid the same wage
c. All workers are paid the minimum wage
d. Only b and c
9. When doing a partial equilibrium analysis, we assume that
a. One market has an effect on other markets
b. One market has little or no effect on other markets
c. Multiple markets are linked together
d. None of the above
10. The feedback effect is
a. A price or quantity adjustment in one market caused by a price or quantity adjustment in a related market.
b. A quantity adjustment in unrelated markets due to market psychology
c. A price adjustment in unrelated markets due to market psychology
d. Only b and c
11. General equilibrium analysis determines prices and quantities in
a. Related markets simultaneously
b. Unrelated markets spontaneously
c. All markets simultaneously
d. Unrelated markets due to market psychology
12. If one market that is related to another market is not in equilibrium
a. It will shift causing the other market to shift, so the second shift happens later than the first.
b. It will shift causing the other market to shift, so the second shift happens independent of the first.
c. It will shift causing the other market to shift, so the second shift must happen at the same time.
d. It will shift independent of the related market.
13. In an efficient allocation of goods
a. One person can become better off without causing someone else to be worse off.
b. No one can be made better off without making someone else worse off.
c. When one person is worse off or better off, all others are worse off or better off at the same time.
d. There can be no efficient allocation of goods because of inefficient transaction costs.
14. The marginal rate of substitution measures
a. The willingness of a consumer to trade one good for another.
b. The amount of money a consumer is not willing to pay in exchange for a good or service.
c. The utility of a good compared to the utility of a service.
d. The MRPL compared to the MRPNR.
15. In an exchange economy where we analyze the behavior of two consumers who can trade either of two goods between them, and where both consumers can make themselves better off by trading with each other, the initial allocation of goods is
a. Efficient
b. Inefficient
c. The actual terms of trade are subject to bargaining
d. Only a and c
16. Costs or benefits of market transactions not reflected in the price are
a. Internally derived
b. Negotiated between the partied
c. Externalities
d. Cannot be determined
17. Effects of market exchanges are
a. Externalities if the effects are included in the price.
b. Not externalities if the effects are not included in the price.
c. Externalities if the effects are not included in the price.
d. Always creating externalities.
18. Externalities exist if
a. The marginal cost and the marginal benefits are different from the actual marginal social benefits.
b. The marginal social benefits and the marginal private benefit equal the marginal private cost.
c. There is no marginal private cost
d. There is not marginal private benefit
19. Adding the marginal external cost to the marginal private cost give us the
a. Marginal social benefit
b. Marginal private benefit
c. Marginal revenue benefit
d. Marginal revenue cost
20. Negative externalities exist when
a. The price of a good reflects the full marginal cost of resources allocated to its production.
b. The cost of a good does not reflect the full marginal cost of resources allocated to its production
c. The price of a good reflects the full marginal cost of resources allocated to its production.
d. The marginal social cost equals the marginal social benefit.
21. Positive externalities exist when
a. Prices fully equal the marginal social benefit of a good or service.
b. Prices fully equal the marginal private cost of a good or service
c. Prices do not fully equal the marginal private benefit of a good or service.
d. Prices do not fully equal the marginal social benefit of a good or service.
22. When the marginal private benefit or cost of goods and services are adjusted so that users consider the actual marginal social benefit or cost of their decisions, the result is
a. Economic equilibrium of marginal costs and marginal benefits
b. Economic efficiency
c. Internalization of externalities
d. Internalization of private benefits and costs
23. Corrective taxes
a. Internalize negative externalities
b. Internalize positive externalities
c. Internalize private benefits
d. Internalize private costs
24. Corrective subsidies
a. Internalize negative externalities
b. Internalize positive externalities
c. Internalize private benefits
d. Internalize private costs
25. Once property rights to a resource are established, the Coase Theorem says the
a. Barter exchange of established rights among the affected parties will achieve efficiency
b. Free exchange of established rights for cash payments among affected parties will achieve efficiency
c. Free exchange of established rights for cash payments among affected parties will only achieve efficiency if accompanied by surety.
d. Once property rights are established by the government, private negotiations cannot change those rights.