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devry ECON312 midterm

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Question;(TCO 1) As a consequence of the condition of scarcitythere is never enough of anything.production has to be centrally planned.things which are plentiful have relatively high prices.individuals and communities have to make choices from among alternatives.Question 2. Question:(TCO 1) The opportunity cost of constructing a new public highway is themoney cost of hiring contractors and construction workers for the new highway.value of other goods and services that must be sacrificed to construct the new highway.expected cost of constructing the new highway in a future year.value of shorter driving times and distances when the new highway is completed.Question 3. Question:(TCO 1) A nation can increase its production possibilities byshifting resources from investment good production to consumer good production.shifting resources from private goods to public goods.improving labor productivity.eliminating discrimination.:Question 4. Question:(TCO 1) Which expression is another way of saying "marginal benefit"?Benefits given upUnintended gainEmployment benefitsExtra benefitQuestion 5. Question:(TCO 1) The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called themanager.entrepreneur.stockbroker.banker.Question 6. Question:(TCO 1) The Soviet Union economy of the 1980s would best be classified asa market system.pure capitalism.laissez-faire capitalism.a command system.Question 7. Question: The simple circular-flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services throughproduct markets.resource markets.employment agencies.business firms.Question 8. Question:(TCO 1) Consumers express self-interest when theyseek the lowest price for a product.reduce business losses.collect economic profits.search for jobs with the highest wages.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?Question 10. Question:(TCO 1) The major "success indicator" for business managers in command economies like the Soviet Union and China in the past wasthe quantity of output.product quality.the amount of profits.worker morale.Question 11. Question:(TCO 2) An increase in demand means thatgiven 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.Question 12. Question:(TCO 2) At the point where the demand and supply curves intersectthe 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.Question 13. Question:(TCO 2) Black markets are associated withprice floors and the resulting product surpluses.price floors and the resulting product shortages.price ceilings and the resulting product shortages.price ceilings and the resulting product surpluses.:Question 14. Question:(TCO 2) An increase in demand for oil along with a simultaneous increase in supply of oil willdecrease 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.Question 15. Question:(TCO 2) If Product Y is an inferior good, a decrease in consumer incomes willmake buyers want to buy less of Product Y.not affect the sales of Product Y.shift the demand curve for Product Y to the left.shift the demand curve for Product Y to the right.Question 16. Question:(TCO 2) If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by20 percent.0.5 percent.5 percent.Question 17. Question:(TCO 2) Total revenue falls as the price of a good is raised, if the demand for the good iselastic.inelastic.unitary elastic.perfectly elastic.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.Question 19. Question:(TCO 2) A state government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand isunity.elastic.inelastic.perfectly elastic.Question 20. Question:(TCO 2) When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition: have elastic demand and students who use financial aid have inelastic demand.have inelastic demand and students who use financial aid have elastic demand.view a college education as an inferior good and students who use financial aid view it as a normal good.view a college education as a normal good and students who use financial aid view it as an inferior good.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.Question 22. Question:(TCO 3) Economic profits are equal tototal 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.Question 23. Question:(TCO 3) The main difference between the short run and the long run is thatfirms earn zero profits in the long run.the long run always refers to a time period of one year or longer.in the short run, some inputs are fixed.in the long run, all inputs are fixed.Question 24. Question:(TCO 3) The law of diminishing returns only applies in cases wherethere is increasing scarcity of factors of production.the price of extra units of a factor is increasing.there is at least one fixed factor of production.capital is a variable input.Question 25. Question:(TCO 3) Marginal cost can be defined as thechange in total fixed cost resulting from one more unit of production.change in total variable cost resulting from one more unit of production.change in average total cost resulting from one more unit of production.change in average variable cost resulting from one more unit of production.Question 26. Question:(TCO 3) If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?None, because fixed costs do not affect marginal cost.Marginal cost would increase by 50 percent.Marginal cost would increase by less than 50 percent.Marginal cost would increase by more than 50 percent.:(TCO 3) Mutual interdependence would tend to limit control over price in which market model?Student Answer: Monopolistic competitionPure competitionPure monopolyCORRECT OligopolyInstructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 2. Question:(TCO 3) Under which market model are the conditions of entry into the market easiest?Student Answer: CORRECT Pure competitionPure monopolyMonopolistic competitionOligopolyInstructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 3. Question:(TCO 3) The production of agricultural products such as wheat or corn would best be described by which market model?Student Answer: Monopolistic competitionCORRECT Pure competitionPure monopolyOligopolyInstructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 4. Question:(TCO 3) The demand curve faced by a purely competitive firmStudent Answer: has unitary elasticity.yields constant total revenues even when price changes.is identical to the market demand curve.CORRECT is the same as its marginal revenue curve.Instructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 5. Question:(TCO 3) A profit-maximizing firm in the short run will expand outputStudent Answer: until marginal cost begins to rise.until total revenue equals total cost.until marginal cost equals average variable cost.CORRECT as long as marginal revenue is greater than marginal cost.Instructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 6. Question:(TCO 3) A firm should increase the quantity of output as long as itsStudent Answer: CORRECT marginal revenue is greater than its marginal cost.marginal cost is greater than its marginal revenue.average revenue is greater than its average total cost.average revenue is greater than its average variable cost.Instructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 7. Question:(TCO 3) The short-run supply curve for a competitive firm is theStudent Answer: entire MC curve.segment of the MC curve lying below the AVC curve.CORRECT segment of the MC curve lying above the AVC curve.segment of the AVC curve lying to the right of the MC curve.Instructor Explanation: Chapter 8Points Received: 3 of 3Comments:Question 8. Question:(TCO 3) The classic example of a private, unregulated monopoly isStudent Answer: Xerox.CORRECT De Beers.General Motors.General Electric.Instructor Explanation: Chapter 10Points Received: 3 of 3Comments:Question 9. Question:(TCO 3) Barriers to entryStudent Answer: usually result in pure competition.CORRECT 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.Instructor Explanation: Chapter 10Points Received: 3 of 3Comments:Question 10. Question:(TCO 3) The demand curve confronting a nondiscriminating, pure monopolist isStudent Answer: horizontal.CORRECT 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.Instructor Explanation: Chapter 10Points Received: 3 of 3Comments:Question 11. Question:(TCO 3) Which is the best example of price discrimination?Student Answer: An airline company charging lower fares per pound for air freight than for passengers.CORRECT 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.Instructor Explanation: Chapter 10Points Received: 3 of 3Comments:Question 12. Question:(TCO 3) In which industry is monopolistic competition most likely to be found?Student Answer: UtilitiesAgricultureCORRECT Retail tradeMiningInstructor Explanation: Chapter 11Points Received: 3 of 3Comments:Question 13. Question:(TCO 3) Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation willStudent Answer: reduce the excess capacity in the industry as firms expand production.CORRECT 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.Instructor Explanation: Chapter 11Points Received: 3 of 3Comments:Question 14. Question:(TCO 3) A unique feature of an oligopolistic industry isStudent Answer: low barriers to entry.standardized products.diminishing marginal returns.CORRECT mutual interdependence.Instructor Explanation: Chapter 11Points Received: 3 of 3Comments:Question 15. Question:(TCO 3) A low concentration ratio means thatStudent Answer: there is a low probability of entering the industry.there is a low probability of success in the industry.CORRECT each firm accounts for a small market share of the industry.each firm accounts for a large market share of the industry.Instructor Explanation: Chapter 11Points Received: 3 of 3Comments:Question 16. Question:(TCO 3) In which set of market models are there the most significant barriers to entry?Student Answer: Monopolistic competition and pure competitionMonopolistic competition and pure monopolyOligopoly and monopolistic competitionCORRECT Oligopoly and pure monopolyInstructor Explanation: Chapter 11Points Received: 3 of 3Comments:Question 17. Question:(TCO 1) The four factors of production areStudent Answer: land, labor, capital, and money.CORRECT land, labor, capital, and entrepreneurial ability.labor, capital, technology, and entrepreneurial ability.labor, capital, entrepreneurial ability, and money.Instructor Explanation: Chapter 1Points Received: 3 of 3Comments: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) representdiagram1Graph DescriptionStudent Answer: goods and resources, respectively.money incomes and output, respectively.output and money incomes, respectively.CORRECT resources and goods, respectively.Instructor Explanation: Chapter 2Points Received: 3 of 3Comments:Question 19. Question:(TCO 2) Refer to the diagram. An increase in quantity demanded is depicted by adiagram2Graph DescriptionStudent Answer: CORRECT move from Point x to Point y.shift from D1 to D2.shift from D2 to D1.move from Point y to Point x.Instructor Explanation: Chapter 3Points Received: 3 of 3Comments:Question 20. Question:(TCO 2) Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the gamePrice per TicketQuantity Demanded$131,000112,00093,00074,00055,00036,000Student Answer: varies inversely with ticket prices.INCORRECT varies directly with ticket prices.CORRECT is perfectly inelastic.is perfectly elastic.Instructor Explanation: Chapter 4Points Received: 0 of 3Comments:Question 21. Question:(TCO 2) Which type of goods is most adversely affected by recessions?Student Answer: Goods for which the income-elasticity coefficient is relatively low or negative.CORRECT 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.Instructor Explanation: Chapter 4Points Received: 3 of 3Comments:Question 22. Question:(TCO 3) The following cost data are for a firm in the short run:Output Total Cost0 $4001 5002 5503 6004 6505 700What is the firm's average variable cost at an output of 5 units?Student Answer: $30CORRECT $60$120$140Instructor Explanation: Chapter 7Points Received: 3 of 3Comments:Question 23. Question:(TCO 1) Refer to the diagram. Points A, B, C, D, and E showpoints diagram1Graph DescriptionStudent Answer: that the opportunity cost of bicycles increases, while that of computers is constant.CORRECT combinations of bicycles and computers that society can produce by using its resources efficiently.that the opportunity cost of computers increases, while that of bicycles is constant.that society's demand for computers is greater than its demand for bicycles.Instructor Explanation: Chapter 1Points Received: 3 of 3Comments:Question 24. Question:(TCO 3) Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures asStudent Answer: CORRECT rent-seeking.price discrimination.X-efficiency.network effects.Instructor Explanation: Chapter 10Points Received: 3 of 3Comments: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?Student Answer: a)Marginal revenue is greater than marginal cost at the current output level. As such, the monopolist should increase output to a point where marginal costs equal marginal revenue. b) That's only case if a firm's total Revenue is greater than it's total variable costs. A firm will shut down if total variable Costs is greater than total revenue.Instructor Explanation: Chapter 8 and 10.Marginal revenue is greater than marginal cost at the current level of output. The monopolist should increase output to where marginal costs equal marginal revenue. For some business owners, keeping their businesses open will result in lesser losses than shutting down the businesses. However, in many cases the revenue from keeping a business open is not enough to cover the total costs of running it. To cover the gap, the business owner will reduce or stop maintenance of the facility to reduce costs and make the business profitable again. However, this profitability will not last, as consumers are willing to pay less and less to the business due to its deteriorated state. Thus, revenue will fall and, even with a zero maintenance cost, the business will no longer be profitable, so the owner will then finally shut it down.Points Received: 25 of 25Comments: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.Student Answer: a) The demand curve will shift to the right assuming that iPods are normal goods. b) The demand curve will shift to the left. c) The demand curve will shift to the left d) No effect on the demand curve for iPods since milk is neither a substitute or a complement good to iPods.Instructor Explanation: (a) Since 18-to-25-year-olds are the main users of portable digital music players, this will increase the demand for iPods (assuming iPods are a normal good). This will cause the demand curve to shift outward.(b) These efforts raise the price of MP3s for music users that used to get their music for free from downloading services because they are now forced to purchase music through legal downloading sites. Since MP3s are a complementary good to iPods, the demand for iPods will decrease as a result of the artists' lobbying efforts.(c) A raise in price will not shift the demand curve for iPods. Rather, the higher price will simply discourage some consumers from purchasing one and demand for iPods will decrease along the demand curve to a lower quantity at the new price.(d) Since milk is unrelated to iPods, the decrease in the price of milk will have no effect on the demand for iPods and the demand curve will remain the same.Points Received: 25 of 25

 

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