Question 1: According to the principle of diminishing returns, an additional worker decreases total output
True
False
Question 2: The marginal output of labor is the amount of output that can be produced if one more unit of labor is added
True
False
Question 3: People will buy more of a normal good when their income increases
True
False
Question 4: People will buy more of an inferior good when their income decreases.
True
False
Question 5: As the price of a product rises, the quantity supplied increases
True
False
Question 6: To compute the price elasticity of demand, we divide the percentage change in price by the percentage change in quantity demanded
True
False
Question 7: In general, the demand for a product is more elastic in the long run than in the short run
True
False
Question 8: The marginal cost curve always intersects the average total cost curve at the minimum of average cost.
True
False
Question 9: Diminishing marginal returns occur in the long-run.
True
False
Question 10: The long-run supply curve is upward sloping in a constant cost industry
True
False
Question 11: The Latin phrase ceteris paribus means that when a relationship between two variables is being studied
we recognize that some factors are unknown.
both are treated as unpredictable
all other variables are held fixed
neither of those two variables is allowed to change.
Question 12: An example of physical capital is:
strength needed to perform physical labor.
money
stocks and bonds.
a laser printer.
Question 13: The principle that what matters to people is the real value or purchasing power of money, is the:
real-Norminal principle.
marginal principle.
spillover principle
principle of diminishing returns
Question 14: Economics is the study of
how government officials decide which goods and services are produced
how society uses limited resources
how to invest in the stock market.
the role of money in markets.
Question 15: Macroeconomics is best described as the study of:
the nation's economy as a whole
the relationship between inflation and wage inequality
the choices made by individual households, firms and governments
very large issues.
Question 16: The opportunity cost of something is
the price charged for it
the search cost required to find it
the cost of the labor used to produce it
the best alternative you sacrifice to get it.
Question 17: If there is a negative relationship between x and y, then when:
x increases y does not change
neither x nor y change
y increases x does not change
when x increases y decreases.
Question 18: The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output
decreases at a decreasing rate
decreases at an increasing rate
increases at a decreasing rate
increases at an increasing rate
Question 19: Judy demands more peanuts as her income increases. From this, we can conclude that
peanuts are a complementary good.
peanuts are an inferior good.
peanuts are a substitute good.
peanuts are a normal good.
Question 20: The price elasticity of demand is calculated by:
the percentage change in price divided by the percentage change in quantity demanded
the change in price divided by the change in quantity demanded.
the change in quantity demanded divided by the change in price.
the percentage change in quantity demanded divided by the percentage change in price.
Question 21: If the price elasticity of demand is 0.5, this means that a ________ increase in price causes a ________ decrease in quantity demanded.
20%, 100%
20%, 10%
5%, 1%
20%, 1%
Question 22: The responsiveness of quantity demanded to a change in price is known as the:
price elasticity of demand
price elasticity of supply.
income elasticity of demand.
cross elasticity of demand.
Question 23: If a product has few acceptable substitutes, demand for the product is most likely to be:
elastic.
inelastic.
very elastic
very inelastic.
Question 24: The price elasticity of demand reflects the responsiveness of:
demand to a change in price.
demand to a change in price of a substitute good.
how firms respond to changes in demand.
quantity demanded to a change in price.
Question 25: A good synonym for elasticity would be:
demand.
change
responsiveness
stickiness.
Question 26: An inferior good is defined as a good for which demand decreases when:
the price decreases
income decreases.
income increases
the price increases.
Question 27: Assume that butter and margarine are substitutes. When the price of butter increases
the demand for margarine increases.
the supply of margarine decreases.
the supply of margarine increases.
the demand for margarine decreases.
Question 28: The law of demand states that quantity demanded of a product increases as:
the price of the product rises
the price of the product falls.
consumer income rises
the prices of other products fall.
Question 29: Accountants include ________ costs as part of a firm's costs, while economists include ________ costs.
implicit, no implicit
explicit, no explicit
explicit and implicit,implicit
explicit, explicit and implicit
Question 30: In the short-run, ________ factors of production are fixed, while in the long-run, ________ of them are
some, none
no, at least some
all, at least some
all, none
Question 31: The minimum efficient scale is:
the output level beyond which the firm will not experience scale economies.
the minimum quantity where a firm would be able to produce profitably
the output level beyond which the firm will experience scale economies.
the quantity after which it makes no sense for a firm to produce.
Question 32: A firm experiences diminishing marginal returns because:
all factors of production are variable
people "learn by doing."
at least one factor of production is fixed.
all factors of production are fixed.
Question 33: In long-run equilibrium for a competitive firm economic profits
may be positive, negative, or zero
will be positive
will be zero.
will be negative.
Question 34: A firm's average profit is the difference between:
price and average cost.
total revenue and total cost.
total profit and marginal profit.
its fixed and variable costs
Question 35: In short-run equilibrium for a competitive firm economic profits:
will be zero
will be negative.
may be positive, negative, or zero.
will be positive.
Question 36: An input is indivisible if
it cannot be used as a substitute for other inputs in the production process.
it cannot be scaled down to produce a smaller quantity of output.
it cannot be increased to produce a larger quantity of output.
it is sufficiently inexpensive to purchase that firms will want to buy as much as they can.
Question 37: Natural monopolies:
are usually small companies.
often compete against a large number of competitors.
are often regulated
Question 38: A market served by only one firm is called a
monopoly
perfectly competitive market.
oligopoly.
Any of the above could be correct.
Question 39: Which of the following is not a characteristic of a monopolistically competitive market?
Firms have some control over price.
Firms hold patents on their products.
There are no artificial barriers to entry.
The products that firms sell are slightly different.
Question 40: A group of firms that coordinate their pricing decisions is a(n):
coalition.
industry.
natural monopoly
cartel.
Question 41: As compared to a perfectly competitive firm, a monopolistically competitive firm will:
have more control over price.
have less control over price.
face many more competitors
face more barriers to entry.
Question 42: The word "monopolistic" in the label "monopolistic competition" refers to the fact that:
there is only one firm producing in the market.
each firm produces a unique version of the product.
firms have no control over the price they charge.
none of the above
Question 43: When firms cooperate with each other rather than compete:
both consumers and firms end up better off.
they will agree to set low prices to help each other out.
the firms will end up better off (they will act as a monopoly).
consumers will end up better off.
Question 44: An arrangement between firms whereby decision making is controlled by a board of trustees is known as
a compact between industry and government.
a merger
predatory pricing.
a trust.