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Question;1. Question;(TCO 1) What is the economic;meaning of the expression that "There is no such thing as a free;lunch?;It refers to "free-riders," who do;not pay for the cost of a product but who receive the benefit from it.;It means that economic freedom is limited by;the amount of income available to the consumer.;It means that there is an opportunity cost;when resources are used to provide "free" products.;It indicates that products only have value;because people are willing to pay for them.;Chapter;1;Question 2. Question;(TCO 1) Henry wants to buy a;book. The economic perspective suggests;that Henry will buy the book if;the book will give him utility.;his income is high.;the marginal cost of the book is greater than;its marginal benefit.;the marginal benefit of the book is greater;than its marginal cost.;Chapter;1;0;of 3;Question 3. Question;(TCO 1) Which situation would;most likely cause a nation's production possibilities curve to shift inward?;The construction of more capital goods;An increase in discrimination based on race;An increase in the number of skilled immigrant;workers;The destruction from bombing and warfare in a;losing military conflict;Chapter;1;Question 4. Question;(TCO 1) Which expression is;another way of saying "marginal benefit"?;Benefits given up;Unintended gain;Employment benefits;Extra benefit;Chapter;1;Question 5. Question;(TCO 1) Which would not be;considered as a capital resource of a business by an economist?;A van used by a mother to transport the family;around;An office computer used by an accountant;A crane used by a building contractor;A razor used by a barber;Chapter;1;Question 6. Question;(TCO 1) Another term for;capitalism is;the command system.;the socialist economy.;the market system.;the system of inputs and outputs.;Chapter;2;Question 7. Question;(TCO 1) Markets in which firms;sell their output of goods and services are called;resource markets.;product markets.;command markets.;mixed markets.;Chapter;2;Question 8. Question;(TCO 1) By free enterprise, we;mean that;products are provided free to those who can't;afford to buy them.;individuals may obtain resources, organize;production, and sell the resulting output in any legal way they choose.;individual producers are free to produce;whatever the government decides is needed by the society.;individuals are free to buy whatever products;will satisfy their needs the most.;Chapter;2;Question 9. Question;(TCO 1) Which is not one of;the five fundamental questions that an economy must deal with?;How will the goods and services be produced?;Why should the goods and services be produced?;Who is to receive the goods and services;produced in the economy?;In what ways will progress be promoted?;Chapter;2;Question 10. Question;(TCO 1) A characteristic of;centrally planned economies is that;the price is relatively unimportant in;allocating resources.;output reflects the pattern of consumer;spending.;income is fairly distributed among;individuals.;there are many incentives for innovation and;hard work.;Chapter;2;Question 11. Question;(TCO 2) An increase in demand;means that;given supply, the price of the product will;decline.;the demand curve has shifted to the right.;price has declined and consumers therefore;want to purchase more of the product.;the demand curve has shifted to the left.;Chapter;3;Question 12. Question;(TCO 2) At the point where the;demand and supply curves intersect;the buying and selling decisions of consumers;and producers are inconsistent with one another.;the market is in disequilibrium.;there is neither a surplus nor a shortage of;the product.;quantity demanded exceeds quantity supplied.;Chapter;3;Question 13. Question;(TCO 2) If an effective price;ceiling is placed on hamburgers then;the quantity demanded will exceed the quantity;supplied.;a black market for hamburger may evolve.;consumers may want government to ration;hamburger.;all of these are likely outcomes.;0;of 3;Question 14. Question;(TCO 2) An increase in demand;for oil along with a simultaneous increase in supply of oil will;decrease price and increase quantity.;increase price and decrease quantity.;increase quantity, but whether it increases;price depends on how much each curve shifts.;increase price, but whether it increases;quantity depends on how much each curve shifts.;Chapter;3;Question 15. Question;(TCO 2) For most products;purchases tend to fall with decreases in buyers' incomes. Such products are known as;inferior goods.;direct goods.;average goods.;normal goods.;Chapter;3;Question 16. Question;(TCO 2) When the price of a;product is increased 10 percent, the quantity demanded decreases 15;percent. In this range of prices, demand;for this product is;elastic.;inelastic.;cross-elastic.;unitary elastic.;Chapter;4;Question 17. Question;(TCO 2) Total revenue falls as;the price of a good is raised, if the demand for the good is;elastic.;inelastic.;unitary elastic.;perfectly elastic.;Chapter;4;Question 18. Question;(TCO 2) You are the sales;manager for a software company and have been informed that the price elasticity;of demand for your most popular software is less than 1. To increase total revenues, you should;increase the price of the software.;decrease the price of the software.;hold the price of the software constant.;increase the supply of the software.;Chapter;4;Question 19. Question;(TCO 2) If the demand for a;product is elastic, then;a higher tax on the product will generate more;tax revenue.;a higher tax on the product will generate less;tax revenue.;total revenue will decrease as price;decreases.;total revenue will remain constant as price;increases.;Chapter;4;Question 20. Question;(TCO 2) Airlines charge;business travelers more than leisure travelers because there is a more;elastic supply of business travel.;inelastic supply of business travel.;elastic demand for business travel.;inelastic demand for business travel.;Chapter;4;Question 21. Question;(TCO 3) Suppose that you could;prepare your own tax return in 15 hours, or you could hire a tax specialist to;prepare it for you in two hours. You;value your time at $11 an hour. The tax;specialist will charge you $55 an hour.;The opportunity cost of preparing your own tax return is;$40.;$55.;$110.;$165.;Chapter;7;Question 22. Question;(TCO 3) Economic profits are;equal to;total revenues minus fixed costs.;total revenues minus the costs of raw;materials.;total revenues minus the opportunity costs of;all inputs.;gross profit minus selling and operating;expenses.;Chapter;7;Question 23. Question;(TCO 3) In the short run;a firm cannot vary its output level.;all factors of production can be varied.;a firm can change its fixed inputs.;output is raised or reduced by changing the levels;of variable inputs.;Chapter;7;Question 24. Question;(TCO 3) Variable costs are;sunk costs.;costs that change every day.;costs that change with the level of;production.;the change in total cost due to the production;of an additional unit of output.;Chapter;7;Question 25. Question;(TCO 3) At an output of 20,000;units per year, a firm's variable costs are $80,000 and its average fixed costs;are $3. The total costs per year for the;firm are;$80,000.;$100,000.;$140,000.;$240,000.;Chapter;7;Question 26. Question;(TCO 3) If you know that total;fixed cost is $200, total variable cost is $600, and total product is four;units, then average total cost must be;$200.;$250.;$800.;$3200.;Chapter;7;Question 1. Question;(TCO 3) In which market model;would there be a unique product for which there are no close substitutes?;Monopolistic competition;Pure competition;Pure monopoly;Oligopoly;Chapter;8;Question 2. Question;(TCO 3) Local electric or gas;utility companies mostly operate in which market model?;Monopolistic competition;Pure competition;Pure monopoly;Oligopoly;Chapter;8;Question 3. Question;(TCO 3) The production of;agricultural products such as wheat or corn would best be described by which;market model?;Monopolistic competition;Pure competition;Pure monopoly;Oligopoly;Chapter;8;Question 4. Question;(TCO 3) The demand curve faced;by a purely competitive firm;has unitary elasticity.;yields constant total revenues even when price;changes.;is identical to the market demand curve.;is the same as its marginal revenue curve.;Chapter;8;Question 5. Question;(TCO 3) Let us suppose;Harry's, a local supplier of chili and pizza, has the following;revenue-and-cost structure;Total Revenue $3,000 Per Week;Total Variable Cost $2,000 Per Week;Total Fixed Costs $2,000 Per Week;Harry's should stay open in the long run.;Harry's should shut down in the short run.;Harry's should stay open in the short run.;Harry's should shut down in the short run but;reopen in the long run.;Chapter;8;Question 6. Question;(TCO 3) A firm should always;continue to operate at a loss in the short run if;the firm will show a profit.;the owner enjoys helping her customers.;it can cover its variable costs and some of;its fixed costs.;the firm cannot produce any other products;more profitably.;Chapter;8;Question 7. Question;(TCO 3) In pure competition;price is determined where the industry;demand and supply curves intersect.;total cost is greater than total revenue.;demand intersects the individual firm's marginal;cost curve.;average total cost equals total variable;costs.;Chapter;8;Question 8. Question;(TCO 3) The classic example of;a private, unregulated monopoly is;Xerox.;De Beers.;General Motors.;General Electric.;Chapter;10;Question 9. Question;(TCO 3) Barriers to entry;usually result in pure competition.;can result from government regulation.;exist in economic theory but not in the real;world.;are typically the result of wrongdoing on the;part of a firm.;Chapter;10;Question 10. Question;(TCO 3) The demand curve;confronting a nondiscriminating, pure monopolist is;horizontal.;the same as the industry's demand curve.;more elastic than the demand curve confronting;a competitive firm.;derived by vertically summing the individual;demand curves for the buyers.;Chapter;10;Question 11. Question;(TCO 3) Which is the best;example of price discrimination?;An airline company charging lower fares per;pound for air freight than for passengers.;A telephone company charging lower rates to;weekend users than weekday users.;A supermarket charging lower prices in its;inner city store than its out-of-town store.;A private doctor charging higher fees to;patients receiving special services than patients receiving regular services.;Chapter;10;Question 12. Question;(TCO 3) Monopolistic;competition is characterized by firms;producing differentiated products.;making economic profits in the long run.;producing at optimal productive efficiency.;producing where price equals marginal cost.;Chapter;11;Question 13. Question;(TCO 3) Assume that in a;monopolistically competitive industry, firms are earning economic profit. This situation will;reduce the excess capacity in the industry as;firms expand production.;attract other firms to enter the industry;causing the firm's profits to shrink.;cause firms to standardize their product to;limit the degree of competition.;make the industry allocatively efficient as;each firm seeks to maintain its profits.;Chapter;11;Question 14. Question;(TCO 3) A unique feature of an;oligopolistic industry is;low barriers to entry.;standardized products.;diminishing marginal returns.;mutual interdependence.;Chapter;11;Question 15. Question;(TCO 3) A low concentration;ratio means that;there is a low probability of entering the;industry.;there is a low probability of success in the;industry.;each firm accounts for a small market share of;the industry.;each firm accounts for a large market share of;the industry.;Chapter;11;Question 16. Question;(TCO 3) In which set of market;models are there the most significant barriers to entry?;Monopolistic competition and pure competition;Monopolistic competition and pure monopoly;Oligopoly and monopolistic competition;Oligopoly and pure monopoly;Chapter;11;Question 17. Question;(TCO 1) Money is not an;economic resource because;money, as such, does not produce anything.;idle money balances do not earn interest;income.;it is not scarce.;money is not a free gift of nature.;Chapter;1;Question 18. Question;(TCO 1) Refer to the diagram;below which is based on the Circular Flow Model in Chapter 2. Arrows (1) and (2) represent;Graph Description;goods and resources, respectively.;money incomes and output, respectively.;output and money incomes, respectively.;resources and goods, respectively.;Chapter;2;Question 19. Question;(TCO 2) Refer to the;diagram. A decrease in demand is;depicted by a;Graph Description;move from Point x to Point y.;shift from D1 to D2.;shift from D2 to D1.;move from Point y to Point x.;Chapter;3;Question 20. Question;(TCO 2) Refer to the;information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full;house for the game, it would;Price per Ticket Quantity;Demanded;$13 1,000;11 2,000;9 3,000;7 4,000;5 5,000;3 6,000;set price so as to maximize its total revenue.;encourage scalpers to sell their tickets for;more than $7.;set ticket prices at $5.;set ticket prices at $9.;Chapter;4;Question 21. Question;(TCO 2) Which type of goods is;most adversely affected by recessions?;Goods for which the income-elasticity;coefficient is relatively low or negative.;Goods for which the income-elasticity;coefficient is relatively high and positive.;Goods for which the cross-elasticity;coefficient is positive.;Goods for which the cross-elasticity;coefficient is negative.;Chapter;4;Question 22. Question;(TCO 3) In the figure, Curves;1, 2, 3, and 4 represent the;Graph Description;ATC, MC, AFC, and AVC curves, respectively.;MC, AFC, AVC, and ATC curves, respectively.;MC, ATC, AVC, and AFC curves, respectively.;ATC, AVC, AFC, and MC curves, respectively.;Chapter;7;Question 23. Question;(TCO 1) Refer to the;diagram. If society is producing nine;units of bicycles and four units of computers and it now decides to increase;computer output to six, the cost;Graph Description;will be four units of bicycles.;will be two units of bicycles.;will be zero because unemployed resources are;available.;of doing so cannot be determined from the;information given.;Chapter;1;Question 24. Question;(TCO 3) What type of barrier;to entry was used by De Beers throughout much of its history to maintain its;monopoly position?;Patent protection;Government regulation;Economies of scale;Ownership of an essential resource;Chapter;10;Question 25. Question;(TCO 3) a.) A pure monopolist;determines that at the current level of output the marginal cost of production;is $2, average variable costs are $2.75, and average total costs are;$2.95. The marginal revenue is;$2.75. What would you recommend that the;monopolist do to maximize profits? b.);Why might a business owner keep their business open but let it deteriorate;rather than shut it down? Will this;profitability last?;Question 26. Question;(TCO 2) Evaluate how the;following situations will affect the demand curve for iPods.;(a) Income statistics show that income of 18?25-year-olds;have increased by 10 percent over the last year.;(b) Efforts of music artists wanting greater protection of;their music result in more stringent enforcement of copyrights and the shutdown;of numerous illegal downloading sites.;(c) Believing that it has significant control of the market;for portable digital music players, Apple decides to raise the price of iPods;with the goal of increasing profits.;(d) The price of milk decreases.


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