1.
Nation X has a comparative advantage in the production of a product compared to Nation Y
when:
A. It imposes a tariff on the import of the product
B. The trading possibilities line shifts outward
C. It is achieving full employment of resources
D. It has the lower domestic opportunity cost of the two countries
2.
If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then:
A. the peso has appreciated in value.
B. Americans will buy more Mexican goods and services.
C. more U.S. goods and services will be demanded by the Mexicans.
D. the dollar has depreciated in value.
3.
Depreciation of the dollar will:
A. decrease the prices of both U.S. imports and exports.
B. increase the prices of both U.S. imports and exports.
C. decrease the prices of U.S. imports, but increase the prices to foreigners of U.S. exports.
D. increase the prices of U.S. imports, but decrease the prices to foreigners of U.S. exports.
4.
Which is not a form of product differentiation for the monopolistically competitive firm?
A. Brand names and trademarks
B. Promotion and packaging
C. Location and accessibility
D. Standard hours and procedures
5.
Monopolistic competition is characterized by firms:
A. Producing differentiated products
B. Making economic profits in the long run
C. Producing at optimal productive efficiency
D. Producing where price equals marginal cost
6.
An oligopolistic market is consistent with:
A. All firms making economic profits
B. A small number of firms in the industry
C. The existence of barriers to entry
D. All of the above
7.
Mutual interdependence means that each firm in oligopolistic industry:
A. Faces a perfectly inelastic demand for its product
B. Considers the reactions of its rivals when it determines its price policy
C. Produces a product identical to the products produced by its rivals
D. Produces a product similar but not identical to the products produced by its rivals
8.
A monopoly is most likely to emerge and be sustained when:
A. Output demand is relatively elastic
B. Firms have U-shaped, average-total-cost curves
C. Fixed capital costs are small relative to total costs
D. Economies of scale are large relative to market demand
9.
At the profit-maximizing level of output, a monopolist will always operate where:
A. Price is greater than marginal cost
B. Price is greater than average revenue
C. Average total cost equals marginal cost
D. Total revenue is greater than total cost
10.
Many people believe that monopolies charge any price they want to without affecting sales.
Instead, the output level for a profit-maximizing monopoly is determined by:
A. Marginal cost = demand
B. Marginal revenue = demand
C. Average total cost = demand
D. Marginal cost = marginal revenue
11.
A profit-maximizing firm should shut down in the short run if the average revenue it receives is
less than:
A. Average variable cost
B. Average total cost
C. Average fixed cost
D. Marginal cost
12.
When compared with the purely competitive industry with identical costs of production, a
monopolist will produce:
A. More output and charge the same price
B. More output and charge a higher price
C. Less output and charge a higher price
D. Less output and charge the same price
13.
Which characteristic would best be associated with pure competition?
A. Few sellers
B. Price taker
C. Nonprice competition
D. Product differentiation
14.
Which is a feature of a purely competitive market?
A. Price differences between firms producing the same product
B. Significant barriers to entry into the industry
C. The industry's demand curve is perfectly elastic
D. Products are standardized or homogeneous
15.
Sam owns a firm that produces tomatoes in a purely competitive market. The firm's demand
curve is:
A. A vertical line
B. A horizontal line
C. Upsloping to the right
D. Downsloping to the right
16.
Given the table below, what is the short-run profit-maximizing level of output for the firm?
A. 2 units
B. 3 units
C. 4 units
D. 5 units
17.
The MR = MC rule applies:
A. to firms in all types of industries.
B. only when the firm is a "price taker."
C. only to monopolies.
D. only to purely competitive firms.
18.
A purely competitive firm will be willing to produce at a loss in the short run provided:
A. The loss is no greater than its total variable costs
B. The loss is no greater than its marginal costs
C. The loss is no greater than its total fixed costs
D. Price exceeds marginal costs
19.
To the economist, total cost includes:
A. explicit and implicit costs, including a normal profit.
B. neither implicit nor explicit costs.
C. implicit, but not explicit, costs.
D. explicit, but not implicit, costs.
20.
The total variable cost of producing 5 units is:
A. $61.
B. $48.
C. $37.
D. $24.
21.
The price elasticity of demand is a measure of the:
A. steepness or slope of a demand curve.
B. absolute changes in quantity demanded and price.
C. responsiveness of quantity demanded to a change in price.
D. sensitivity of the quantity demanded for one good to a change in the price of another good.
22.
If a 5 percent fall in the price of a product causes the quantity demanded of the product to
increase by 10 percent, the demand is:
A. inelastic.
B. elastic.
C. unit elastic.
D. perfectly elastic.
23.
If a business decreased the price of its product from $10 to $9 when demand was price inelastic,
then total revenues would:
A. decrease.
B. increase.
C. remain unchanged.
D. be perfectly inelastic.
24.
The demand curve shows the relationship between:
A. money income and quantity demanded.
B. price and production costs.
C. price and quantity demanded.
D. consumer tastes and the quantity demanded.
25.
Which of the following will not cause the demand for product K to change?
A. a change in the price of close-substitute product J
B. an increase in consumer incomes
C. a change in the price of K
D. a change in consumer tastes
26.
Other things equal, which of the following might shift the demand curve for gasoline to the left?
A. the discovery of vast new oil reserves in Montana
B. the development of a low-cost electric automobile
C. an increase in the price of train and air transportation
D. a large decline in the price of automobiles
27.
Refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by
columns (3) and (5), equilibrium price and quantity will be:
A. $10 and 60 units.
B. $9 and 50 units.
C. $8 and 60 units.
D. $7 and 50 units.
28.
The key economic concept that serves as the basis for the study of economics is:
A. inflation.
B. unemployment.
C. money.
D. scarcity.
29.
The production possibilities curve represents which of the following?
A. the amount of goods attainable with variable resources
B. the maximum amount of goods attainable with variable resources
C. maximum combinations of goods attainable with fixed resources
D. the amount of goods attainable if prices decline
30.
A reduction in the level of unemployment would have which effect with respect to the nation's
production possibilities curve?
A. It would shift the curve to the right.
B. It would shift the curve to the left.
C. It would not shift the curve; it would be represented by moving from a point inside the curve toward
the curve.
D. It would not shift the curve; it would be represented by moving from a point on the curve to a point to
the right of the curve.