Download 3-7-11 Cumulative Review

1.
3-7-11 Cumulative Review
The study of economics is primarily concerned with:
A. Expanding the production of goods and services
B. Making the best use of scarce productive resources
C. Equalizing the distribution of consumer income and wealth
D. Reallocating resources from consumption to production in the economy
2.
A recurring theme in economics is:
A. Unlimited resources and unlimited economic wants
B. People can increase resources by limiting their economic wants
C. People have limited economic wants and limited resources
D. People have unlimited economic wants, but limited resources
3.
What is the economic meaning of the expression that "there is no such thing as a free lunch"?
A. It refers to "free-riders," who do not pay for the cost of a product, but who receive the benefit from it
B. It means that economic freedom is limited by the amount of income available to the consumer
C. It means that there is an opportunity cost when resources are used to provide "free" products
D. It indicates that products only have value because people are willing to pay for them
4.
Opportunity cost is best defined as:
A. Marginal cost minus marginal benefit
B. The time spent on an economic activity
C. The value of the best foregone alternative
D. The money cost of an economic decision
5.
Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay to fly to another
city to attend the concert of her favorite music group. The cost of transportation for the trip is $250. The
cost of the concert ticket is $50. The opportunity cost of Tammie's trip to the concert is:
A. $300
B. $450
C. $500
D. $600
6.
Which of the following is a normative economic statement?
A. The Federal budget surplus rose by 10 billion dollars
B. A fall in the unemployment rate was forecast for next month
C. A trade deficit of 20 billion dollars will harm the economy
D. The Federal funds rate was reduced by half a percentage point
7.
The economizing problem for society is:
A. To achieve a more equitable distribution of income in society
B. That productive resources are scarce relative to economic wants
C. To establish prices which are fair for both producers and consumers
D. That product prices rise more rapidly than incomes of consumers
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8.
Economists would classify all of the following as land except:
A. Two thousand acres of virgin forest
B. A hydroelectric dam
C. Crude oil reserves
D. Iron ore deposits
9.
The graph above shows the production possibilities curve for an economy producing two goods, X and
Y. Which of the points on the graph indicate unemployed resources?
A. D only
B. E only
C. E and A only
D. B and C only
10. Refer to the above graph. The marginal opportunity cost of the third unit of defense goods is:
A. 2 units of civilian goods
B. 3 units of civilian goods
C. 4 units of civilian goods
D. 7 units of civilian goods
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11. The economy of the former Soviet Union would best be classified as:
A. A market system
B. Pure capitalism
C. Laissez-faire capitalism
D. A command system
12. By free enterprise, we mean that:
A. Products are provided free to those who can't afford to buy them
B. Individual producers determine how to produce, but government agencies determine what will be
produced
C. Individuals may obtain resources, organize production, and sell the resulting output in any legal way
they choose
D. Individuals are free to produce those products that government agencies determine can be produced
profitably
13. Which is a key feature of the market system?
A. Price floors and price ceilings in all markets
B. Reallocation of all resources from private to public uses
C. The right to own private property and control resource use
D. Central planning by government to provide goods and services
14. Which is one of the five fundamental questions that needs to be answered by economic systems?
A. What is the rate of unemployment?
B. Who will be the richest person in the economy?
C. What goods and services will be produced?
D. Why are the prices for goods and services so high?
15. When economists describe "a market," they mean:
A. A place where stocks and bonds are traded
B. Information networks that allow individuals to keep in touch with each other
C. A hypothetical place where the production of goods and services takes place
D. A mechanism which coordinates actions of consumers and producers to establish equilibrium prices
and quantities
16. A market demand schedule for a product indicates that:
A. As the product's price falls, consumers buy less of the good
B. As a product's price rises, consumers buy less of other goods
C. There is a direct relationship between price and quantity demanded
D. There is an inverse relationship between price and quantity demanded
17. When one speaks of "demand" in a particular market, this refers to:
A. The whole demand curve
B. Only one point on the entire demand curve
C. Only one price-quantity combination on the demand schedule
D. The quantity demanded at a given price
18. In a competitive market for corn, the law of demand indicates that, other things equal, as:
A. The demand for corn decreases, the price will increase
B. Income decreases, the quantity of corn demanded will increase
C. The price of corn decreases, the quantity of corn demanded will increase
D. The price of corn decreases, the quantity of corn demanded will decrease
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19. A result of a fall in the price of gasoline, consumers buy more gasoline and take more driving vacations.
This situation is an illustration of:
A. The income effect
B. The substitution effect
C. Diminishing marginal utility
D. The rationing function of prices
20. Which statement best illustrates the concept of diminishing marginal utility?
A. If the price of hamburger declines, there will be a change in consumer tastes in favor of hamburger
B. A typical consumer will receive less satisfaction from consuming hamburgers than from consuming
pork
C. A typical consumer will receive less satisfaction from consuming the fourth hamburger per week than
the third hamburger per week
D. A decrease in the price of hamburger will cause consumers to buy more hamburger because they
have, in effect, received an increase in income
21. A point on a demand curve indicates:
A. The ratio of the selling price to the buying price
B. A particular price and the corresponding quantity demanded by consumers
C. A combination of two consumer goods which buyers will choose at given prices
D. A situation where the buying and selling decisions of consumers and producers are consistent
22. If product Y is an inferior good, an increase in consumer incomes will:
A. Result in a surplus of product Y
B. Not affect the sales of product Y
C. Shift the demand curve for product Y to the left
D. Shift the demand curve for product Y to the right
23. For most products, purchases tend to rise with increases in buyers' incomes, and to fall with decreases in
buyers' incomes. Such products are known as:
A. Inferior goods
B. Direct goods
C. Average goods
D. Normal goods
24. If an increase in consumer incomes causes the demand curve for product Z to shift to the left, then it can
be said that product Z is a(n):
A. Normal good
B. Luxury good
C. Inferior good
D. Inexpensive good
25. If an increase in consumer incomes causes the demand curve for product Q to shift to the right, then it
can be said that product Q is a(n):
A. Normal good
B. Luxury good
C. Inferior good
D. Inexpensive good
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26. If two goods are close substitutes:
A. Consumers will always buy the one that has the lower price
B. A fall in the price of one will decrease the demand for the other
C. An increase in the price of one causes the demand for the other to decrease
D. A decrease in the price of one causes an increase in the demand for the other
27. If the demand for product J shifts to the left as the price of product K increases, then:
A. The number of consumers of product K has increased
B. The income of consumers of product K has increased
C. J and K are substitute goods
D. J and K are complementary goods
28. Which is not a determinant of supply?
A. The existing state of technology used by the firm
B. The cost of resources used in production
C. The level of government taxes and subsidies
D. The market price of the good
29. Refer to the above graph. An increase in supply would best be reflected by a change from:
A. Point 5 to 4
B. Point 2 to 1
C. Line A to B
D. Line A to C
30. Refer to the above graph. An increase in the quantity supplied would best be reflected by a change
from:
A. Point 5 to 1
B. Point 3 to 4
C. Line A to B
D. Line A to C
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31. Refer to the above table. If supply decreased by 2 units at each price, what would the new equilibrium
price and quantity be?
A. $3 and 5 units
B. $4 and 4 units
C. $5 and 5 units
D. $6 and 6 units
32. If the price elasticity of demand for a good is .75, the demand for the good can be described as:
A. Normal
B. Elastic
C. Inferior
D. Inelastic
33. Which demand curve above is relatively more elastic between P1 and P2?
A. D1
B. D2
C. D3
D. D4
34. Which demand curve above is perfectly inelastic?
A. D2
B. D3
C. D4
D. D5
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35. Refer to the above graphs. A price increase from $20 to $40 causes quantity demanded to decrease from
100 units to 50 units. Which graph best illustrates the price elasticity of demand for this good?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
36. Which is not characteristic of a product with relatively inelastic demand?
A. The good is regarded by consumers as a necessity
B. There are a large number of good substitutes for the good
C. Buyers spend a small percentage of their total income on the product
D. Consumers have had only a short time period to adjust to changes in price
37. The satisfaction or pleasure one gets from consuming a good or service is:
A. Price
B. Utility
C. Consumption
D. Preferences
38. Total utility is best defined by which of the following?
A. The change in marginal utility multiplied by the price of a product
B. The maximum amount of satisfaction from consuming a product
C. The total satisfaction received from consuming a particular amount of a product
D. The additional satisfaction received from consuming one more unit of a product
39. Which of the following defines marginal utility?
A. The change in total utility divided by the price of a product
B. The maximum amount of satisfaction from consuming a product
C. The total satisfaction received from consuming as much of the product that is available for
consumption
D. The additional satisfaction received from consuming one more unit of a product
40. Which best expresses the law of diminishing marginal utility?
A. The more consumption of a product, the smaller is the total and marginal utility from the
consumption
B. The less consumption of a product, the greater is the total and marginal utility of the consumption
C. The more consumption of a product, the smaller is the marginal utility from consuming an additional
unit
D. The more consumption of a product, the smaller is the total and marginal utility from the
consumption
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41. After eating four slices of pizza, you are offered a fifth slice. You turn down the slice. Your refusal
indicates that the:
A. Marginal utility for pizza slices is negative
B. Total utility for pizza slices is negative
C. Marginal utility is positive for the fourth slice and negative for the fifth slice
D. Total utility was positive for the fourth slice and negative for the fifth slice
42. Refer to the above table. What is the marginal utility of the fourth unit?
A. 4
B. 8
C. 27
D. 31
43. Refer to the above table. Marginal utility becomes negative with the consumption of the:
A. Second unit
B. Third unit
C. Fourth unit
D. Fifth unit
44. If a rational consumer is in equilibrium, then:
A. The marginal utility obtained from one product is equal to the marginal utility obtained from any
other product
B. A reallocation of income would increase the consumer's total utility
C. The marginal utility per last dollar spent is the same for all goods consumed
D. Total utility becomes zero
45. The increase in demand for iPods can be explained by:
A. An increase in the technology used to produce iPods
B. A reduction in the price of CD players
C. Improved portability and storage as compared to CD players
D. A decrease in the price of iPods
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46. Consider the above graphs A through D, which depict the total utility a consumer receives from
consuming good X. The principle of diminishing marginal utility is best illustrated by:
A. Graph A
B. Graph B
C. Graph C
D. Graph D
47. Jon Brooks quit his job in a bicycle shop, where he earned $15,000 per year, to become a graduate
student in economics. At the university he attended, he spent $2,000 on books, $1,000 on cough
medicine, and earned $12,000 as an economics instructor. What were Jon's economic costs while
attending college?
A. $18,000
B. $15,000
C. $6,000
D. $3,000
48. 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 2 hours. You value your time at $11.00 an hour. The tax specialist will charge you
$55 an hour. The opportunity cost of preparing your own tax return is:
A. $40
B. $55
C. $110
D. $165
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49. Cash expenditures a firm makes to pay for resources are called:
A. Implicit costs
B. Explicit costs
C. Normal profit
D. Opportunity costs
50. If a firm's revenues just cover all its opportunity costs, then:
A. Normal profit is zero
B. Economic profit is zero
C. Total revenues equal its explicit costs
D. Total revenues equal its implicit costs
51. Economic profit is:
A. Total revenues minus fixed costs
B. Total revenues from sales minus the cost of materials
C. Total revenues minus the opportunity cost of the inputs
D. Gross profit minus selling and operating expenses
52. Economic profit for a company is defined as the total revenues of the firm minus the:
A. Opportunity cost of all resources
B. Explicit costs of production
C. Implicit cost of production
D. Accounting profit
53. Which statement is false?
A. The short run refers to the same calendar time period for all industries
B. In the long run, all inputs can vary
C. Firms may operate at a loss in the short run
D. In the long run, firms do not operate at a loss
54. The short run is a time period in which:
A. All resources are fixed
B. The level of output is fixed
C. The size of the production plant is variable
D. Some resources are fixed and others are variable
55. Which statement is correct?
A. In the short run the plant capacity is variable
B. In the long run the plant capacity is variable
C. In the long run the plant capacity is fixed
D. In the short run, all resources are variable
56. Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly line
basis?
A. An increase in the amount of aluminum the firm buys
B. A change in the production managers of the assembly line
C. A change in the production to a redesigned, new model car
D. An increase in the number of shifts of workers from two to three
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57. The difference between the short run and the long run is that the short run can be characterized as a:
A. "variable" plant period while the long run is a "fixed" plant period
B. "fixed" plant period while the long run is a "variable" plant period
C. "fixed output" period while the long run is a "variable output" period
D. "variable output" period while the long run is a "fixed output" period
58. According to the law of diminishing marginal returns, eventually:
A. Output must fall and then rise as additional units of input are employed
B. Additional inputs will no longer generate average output
C. The additional output generated by additional units of an input will diminish
D. The additional inputs necessary to produce an additional unit of output will diminish
59. The law of diminishing returns for a manufacturing plant of a fixed size implies that, eventually
employing one:
A. More worker will increase output per worker
B. More worker will decrease output per worker
C. Less worker will increase output per worker
D. Less worker will not affect output per worker
60. The law of diminishing returns only applies in cases where:
A. There is increasing scarcity of factors of production
B. The price of extra units of a factor is increasing
C. There is at least one fixed factor of production
D. Capital is a variable input
The next question(s) are based on the following table that provides information on the production of a
product that requires one variable input.
61. Refer to the above table. There are increasing marginal returns through the:
A. First unit of variable input
B. Second unit of variable input
C. Third unit of variable input
D. Fourth unit of variable input
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62. Refer to the above table. Diminishing returns set in with the addition of the:
A. First unit of input
B. Second unit of input
C. Third unit of input
D. Fourth unit of input
63. Refer to the above graph. It shows the marginal product of labor (MPL) and the average product of labor
(APL). At which point above does diminishing marginal returns set in?
A. Point A
B. Point B
C. Point C
D. Point D
64. Refer to the above graph. It shows the marginal product of labor (MPL) and the average product of labor
(APL). At which point are marginal and average product the same as labor is added?
A. Point A
B. Point B
C. Point C
D. Point D
65. Refer to the above graph. It shows the marginal product of labor (MPL) and the average product of labor
(APL). At which point does the marginal product of labor become zero again?
A. Point A
B. Point B
C. Point C
D. Point D
66. Which is not a fixed cost?
A. Monthly rent of $1,000 contractually specified in a one-year lease
B. An insurance premium of $50 per year, paid last month
C. An attorney's retainer of $50,000 per year
D. A worker's wage of $15 per hour
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67. If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then:
A. Marginal cost is $50
B. Average fixed cost is $100
C. Average total cost is $100
D. Average variable cost is $150
68. Refer to the above graph. It shows the total cost curves. Total fixed cost at output level Q2 is measured
by:
A. 0B
B. AC
C. CD
D. DE
69. Refer to the above graph. It shows the total cost curves. Total cost at output level Q2 is measured by:
A. 0C
B. AD
C. CD
D. 0D
70. Refer to the above graph. It shows the total cost curves. Total variable cost at output level Q2 is
measured by:
A. 0C
B. AC
C. CD
D. 0D
71. When marginal cost is increasing:
A. Total cost must be increasing
B. Average total cost must be increasing
C. Average total cost must be decreasing
D. Average fixed costs might be increasing or decreasing
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72. As output increases, average fixed costs:
A. Increase
B. Decrease
C. Remain constant
D. First increase and then decrease
73. Mutual interdependence would tend to limit control over price in which market model?
A. Monopolistic competition
B. Pure competition
C. Pure monopoly
D. Oligopoly
74. In which two market models would advertising be used most often?
A. Pure competition and monopolistic competition
B. Pure competition and pure monopoly
C. Monopolistic competition and oligopoly
D. Pure monopoly and oligopoly
75. There is no control over price by firms in:
A. Oligopoly
B. Pure monopoly
C. Pure competition
D. Monopolistic competition
76. Under which market model are the conditions of entry into the market easiest?
A. Pure competition
B. Pure monopoly
C. Monopolistic competition
D. Oligopoly
77. A purely competitive firm does not try to sell more of its product by lowering its price below the market
price because:
A. Its competitors would not permit it
B. It can sell all it wants to at the market price
C. This would be considered unethical price chiseling
D. Its demand curve is inelastic, so total revenue will decline
14
78. Refer to the above graph for a firm in pure competition. Line A represents:
A. Total revenue
B. Average revenue
C. Average total cost
D. Average fixed cost
79. Refer to the above graph for a firm in pure competition. Line B represents:
A. Total revenue
B. Marginal revenue
C. Average total cost
D. Average fixed cost
80. In pure competition, marginal revenue is:
A. Equal to total revenue
B. Equal to product price
C. Less than product price
D. Greater than product price
Use the table below to answer the next question(s) for a purely competitive firm.
81. Refer to the above table. The marginal revenue from the third unit of output is:
A. $40
B. $50
C. $120
D. $160
15
82. Refer to the above graph. To maximize profits, this firm would produce:
A. 0D units, which will result in a loss equal to ABGH
B. 0E units, which will result in a loss equal to ALFH
C. 0D units, which will result in economic profits equal to BCFG
D. 0E units, which will result in economic profits equal to ABGH
83. Refer to the above graph. At the profit-maximizing level of output there will be:
A. A loss equal to ABGH
B. A loss equal to ALFH
C. Economic profits equal to BCFG
D. Economic profits equal to ABGH
84. Consider the purely competitive firm pictured above. The firm is earning:
A. Normal profits, since its price is above AVC
B. Economic profits, since its price is above AVC
C. Normal profits, since its price just covers ATC
D. Losses, since it is operating at the shutdown point
16
85. Refer to the above graph. It represents a profit-maximizing firm producing under conditions of pure
competition. When the firm is in equilibrium in the short run, its average fixed cost is:
A. EH
B. DE
C. DH
D. DB
86. Refer to the above graph. It represents a profit-maximizing firm producing under conditions of pure
competition. When the firm is in equilibrium in the short run, its average variable cost is:
A. EH
B. DE
C. DH
D. DB
87. Refer to the above graph. It represents a profit-maximizing firm producing under conditions of pure
competition. When the firm is in equilibrium in the short run, the amount of economic profit per unit is:
A. EH
B. DE
C. DH
D. DB
88. One defining characteristic of pure monopoly is that:
A. The monopolist is a price taker
B. The monopolist uses advertising
C. The monopolist produces a product with no close substitutes
D. There is relatively easy entry into the industry, but exit is difficult
89. Which phrase would be most characteristic of pure monopoly?
A. Close substitutes
B. Efficient advertiser
C. Price taker
D. Single seller
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90. Refer to the above graph showing the short-run revenue curves for a monopolist. What price should be
charged in order to maximize total revenue?
A. P1
B. P2
C. P3
D. P4
91. Refer to the above graph showing the short-run revenue curves for a monopolist. At what output level is
demand inelastic?
A. Q1
B. Q2
C. Q3
D. Q4
92. Refer to the above graph. The profit-maximizing monopolist in it will set its price and output at:
A. 0J and 0V, respectively
B. 0G and 0Y, respectively
C. 0K and 0T, respectively
D. 0H and 0X, respectively
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93. Refer to the above graph. Consider a monopolist in short-run equilibrium. This monopolist:
A. Has total fixed costs equal to area BEFC
B. Has total variable costs equal to area 0CFQ
C. Earns economic profit equal to the area of ABED
D. Will cease production since its economic profits are negative
94. A major characteristic of monopolistic competition is:
A. Mutual interdependence
B. A high degree of collusion among firms
C. A relatively large number of firms selling the product
D. Relatively easy entry into an industry, but a relatively difficult exit from the industry
The graph depicts a monopolistically competitive firm
95. Refer to the above graph. In the short run, this monopolistically competitive firm will set price at:
A. $65 and produce 45 units of output
B. $65 and produce 35 units of output
C. $50 and produce 35 units of output
D. $50 and produce 50 units of output
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96. Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically
competitive firm would be represented by graph:
A. A
B. B
C. C
D. D
97. When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict
competition, they are practicing the strategy of:
A. Interindustry competition
B. Limit pricing
C. Price leadership
D. Collusion
Answer the next question(s) based on the following payoff matrix for a duopoly in which the numbers
indicate the profit in millions of dollars for a high-price or a low-price strategy
98. Refer to the above payoff matrix. If both firms collude to maximize joint profits, the total profits for the
two firms will be:
A. $350 million
B. $400 million
C. $500 million
D. $525 million
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99. Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy while firm A maintains
a high-price strategy. Compared to the results from a high-price strategy for both firms, firm B will
now:
A. Lose $75 million in profit and firm A will gain $50 million in profit
B. Gain $50 million in profit and firm A will lose $50 million in profit
C. Gain $75 million in profit and firm A will lose $50 million in profit
D. Gain $50 million in profit and firm A will lose $75 million in profit
Answer the next question(s) based on the following payoff matrix for a duopoly in which the numbers
indicate the profit in thousands of dollars for a high-price or a low-price strategy
100.Refer to the above payoff matrix. If both firms operate independently and do not collude, the most likely
profit is:
A. $400,000 for firm X and $400,000 for firm Y
B. $725,000 for firm X and $475,000 for firm Y
C. $475,000 for firm X and $725,000 for firm Y
D. $625,000 for firm X and $625,000 for firm Y
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3-7-11 Cumulative Review Key
1.
The study of economics is primarily concerned with:
A.
B.
C.
D.
Expanding the production of goods and services
Making the best use of scarce productive resources
Equalizing the distribution of consumer income and wealth
Reallocating resources from consumption to production in the economy
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-1
Level: Easy
McConnell - Chapter 001 #2
Topic: Economics; economic perspective
2.
A recurring theme in economics is:
A.
B.
C.
D.
Unlimited resources and unlimited economic wants
People can increase resources by limiting their economic wants
People have limited economic wants and limited resources
People have unlimited economic wants, but limited resources
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-1
Level: Moderate
McConnell - Chapter 001 #4
Topic: Economics; economic perspective
3.
What is the economic meaning of the expression that "there is no such thing as a free lunch"?
A. It refers to "free-riders," who do not pay for the cost of a product, but who receive the benefit
from it
B. It means that economic freedom is limited by the amount of income available to the consumer
C. It means that there is an opportunity cost when resources are used to provide "free" products
D. It indicates that products only have value because people are willing to pay for them
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-1
Level: Moderate
McConnell - Chapter 001 #9
Topic: Economics; economic perspective
4.
Opportunity cost is best defined as:
A.
B.
C.
D.
Marginal cost minus marginal benefit
The time spent on an economic activity
The value of the best foregone alternative
The money cost of an economic decision
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-1
Level: Difficult
McConnell - Chapter 001 #12
Topic: Economics; economic perspective
1
5.
Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay to fly to
another city to attend the concert of her favorite music group. The cost of transportation for the trip is
$250. The cost of the concert ticket is $50. The opportunity cost of Tammie's trip to the concert is:
A.
B.
C.
D.
$300
$450
$500
$600
AACSB: Analytical Skills
Bloom's: Application
Learning Objective: 1-1
Level: Difficult
McConnell - Chapter 001 #13
Topic: Economics; economic perspective
6.
Which of the following is a normative economic statement?
A.
B.
C.
D.
The Federal budget surplus rose by 10 billion dollars
A fall in the unemployment rate was forecast for next month
A trade deficit of 20 billion dollars will harm the economy
The Federal funds rate was reduced by half a percentage point
AACSB: Analytical Skills
Bloom's: Application
Learning Objective: 1-1
Level: Moderate
McConnell - Chapter 001 #65
Topic: Positive and normative economics
7.
The economizing problem for society is:
A.
B.
C.
D.
To achieve a more equitable distribution of income in society
That productive resources are scarce relative to economic wants
To establish prices which are fair for both producers and consumers
That product prices rise more rapidly than incomes of consumers
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-4
Level: Moderate
McConnell - Chapter 001 #90
Topic: Society's economizing problem
8.
Economists would classify all of the following as land except:
A.
B.
C.
D.
Two thousand acres of virgin forest
A hydroelectric dam
Crude oil reserves
Iron ore deposits
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-4
Level: Moderate
McConnell - Chapter 001 #96
Topic: Society's economizing problem
2
McConnell - Chapter 001
9.
The graph above shows the production possibilities curve for an economy producing two goods, X
and Y. Which of the points on the graph indicate unemployed resources?
A.
B.
C.
D.
D only
E only
E and A only
B and C only
AACSB: Analytical Skills
Bloom's: Knowledge
Learning Objective: 1-5
Level: Easy
McConnell - Chapter 001 #161
Topic: Unemployment, growth, and the future
McConnell - Chapter 001
3
10.
Refer to the above graph. The marginal opportunity cost of the third unit of defense goods is:
A.
B.
C.
D.
2 units of civilian goods
3 units of civilian goods
4 units of civilian goods
7 units of civilian goods
AACSB: Analytical Skills
Bloom's: Application
Learning Objective: 1-5
Level: Moderate
McConnell - Chapter 001 #192
Topic: Production possibilities model
11.
The economy of the former Soviet Union would best be classified as:
A.
B.
C.
D.
A market system
Pure capitalism
Laissez-faire capitalism
A command system
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 2-1
Level: Difficult
McConnell - Chapter 002 #12
Topic: Economic systems
12.
By free enterprise, we mean that:
A. Products are provided free to those who can't afford to buy them
B. Individual producers determine how to produce, but government agencies determine what will be
produced
C. Individuals may obtain resources, organize production, and sell the resulting output in any legal
way they choose
D. Individuals are free to produce those products that government agencies determine can be
produced profitably
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 2-2
Level: Difficult
McConnell - Chapter 002 #16
Topic: Characteristics of the market system
13.
Which is a key feature of the market system?
A.
B.
C.
D.
Price floors and price ceilings in all markets
Reallocation of all resources from private to public uses
The right to own private property and control resource use
Central planning by government to provide goods and services
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 2-2
Level: Easy
McConnell - Chapter 002 #23
Topic: Characteristics of the market system
4
14.
Which is one of the five fundamental questions that needs to be answered by economic systems?
A.
B.
C.
D.
What is the rate of unemployment?
Who will be the richest person in the economy?
What goods and services will be produced?
Why are the prices for goods and services so high?
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 2-2
Level: Easy
McConnell - Chapter 002 #50
Topic: Five fundamental questions
15.
When economists describe "a market," they mean:
A.
B.
C.
D.
A place where stocks and bonds are traded
Information networks that allow individuals to keep in touch with each other
A hypothetical place where the production of goods and services takes place
A mechanism which coordinates actions of consumers and producers to establish equilibrium
prices and quantities
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Moderate
McConnell - Chapter 003 #1
Topic: Demand and demand curve
16.
A market demand schedule for a product indicates that:
A.
B.
C.
D.
As the product's price falls, consumers buy less of the good
As a product's price rises, consumers buy less of other goods
There is a direct relationship between price and quantity demanded
There is an inverse relationship between price and quantity demanded
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Easy
McConnell - Chapter 003 #3
Topic: Demand and demand curve
17.
When one speaks of "demand" in a particular market, this refers to:
A.
B.
C.
D.
The whole demand curve
Only one point on the entire demand curve
Only one price-quantity combination on the demand schedule
The quantity demanded at a given price
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Difficult
McConnell - Chapter 003 #5
Topic: Demand and demand curve
18.
In a competitive market for corn, the law of demand indicates that, other things equal, as:
A.
B.
C.
D.
The demand for corn decreases, the price will increase
Income decreases, the quantity of corn demanded will increase
The price of corn decreases, the quantity of corn demanded will increase
The price of corn decreases, the quantity of corn demanded will decrease
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Moderate
McConnell - Chapter 003 #7
Topic: Demand and demand curve
5
19.
A result of a fall in the price of gasoline, consumers buy more gasoline and take more driving
vacations. This situation is an illustration of:
A.
B.
C.
D.
The income effect
The substitution effect
Diminishing marginal utility
The rationing function of prices
AACSB: Reflective
Bloom's: Comprehension
Learning Objective: 3-1
Level: Difficult
McConnell - Chapter 003 #15
Topic: Demand and demand curve
20.
Which statement best illustrates the concept of diminishing marginal utility?
A. If the price of hamburger declines, there will be a change in consumer tastes in favor of
hamburger
B. A typical consumer will receive less satisfaction from consuming hamburgers than from
consuming pork
C. A typical consumer will receive less satisfaction from consuming the fourth hamburger per week
than the third hamburger per week
D. A decrease in the price of hamburger will cause consumers to buy more hamburger because they
have, in effect, received an increase in income
AACSB: Reflective
Bloom's: Knowledge
Learning Objective: 3-1
Level: Difficult
McConnell - Chapter 003 #18
Topic: Demand and demand curve
21.
A point on a demand curve indicates:
A.
B.
C.
D.
The ratio of the selling price to the buying price
A particular price and the corresponding quantity demanded by consumers
A combination of two consumer goods which buyers will choose at given prices
A situation where the buying and selling decisions of consumers and producers are consistent
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Moderate
McConnell - Chapter 003 #21
Topic: Demand and demand curve
22.
If product Y is an inferior good, an increase in consumer incomes will:
A.
B.
C.
D.
Result in a surplus 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
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Moderate
McConnell - Chapter 003 #38
Topic: Determinants of demand
6
23.
For most products, purchases tend to rise with increases in buyers' incomes, and to fall with decreases
in buyers' incomes. Such products are known as:
A.
B.
C.
D.
Inferior goods
Direct goods
Average goods
Normal goods
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Difficult
McConnell - Chapter 003 #39
Topic: Determinants of demand
24.
If an increase in consumer incomes causes the demand curve for product Z to shift to the left, then it
can be said that product Z is a(n):
A.
B.
C.
D.
Normal good
Luxury good
Inferior good
Inexpensive good
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Moderate
McConnell - Chapter 003 #42
Topic: Determinants of demand
25.
If an increase in consumer incomes causes the demand curve for product Q to shift to the right, then it
can be said that product Q is a(n):
A.
B.
C.
D.
Normal good
Luxury good
Inferior good
Inexpensive good
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Difficult
McConnell - Chapter 003 #41
Topic: Determinants of demand
26.
If two goods are close substitutes:
A.
B.
C.
D.
Consumers will always buy the one that has the lower price
A fall in the price of one will decrease the demand for the other
An increase in the price of one causes the demand for the other to decrease
A decrease in the price of one causes an increase in the demand for the other
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Easy
McConnell - Chapter 003 #45
Topic: Determinants of demand
7
27.
If the demand for product J shifts to the left as the price of product K increases, then:
A.
B.
C.
D.
The number of consumers of product K has increased
The income of consumers of product K has increased
J and K are substitute goods
J and K are complementary goods
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-1
Level: Difficult
McConnell - Chapter 003 #49
Topic: Determinants of demand
28.
Which is not a determinant of supply?
A.
B.
C.
D.
The existing state of technology used by the firm
The cost of resources used in production
The level of government taxes and subsidies
The market price of the good
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-2
Level: Moderate
McConnell - Chapter 003 #123
Topic: Determinants of supply
McConnell - Chapter 003
29.
Refer to the above graph. An increase in supply would best be reflected by a change from:
A.
B.
C.
D.
Point 5 to 4
Point 2 to 1
Line A to B
Line A to C
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-2
Level: Moderate
McConnell - Chapter 003 #126
Topic: Determinants of supply
8
30.
Refer to the above graph. An increase in the quantity supplied would best be reflected by a change
from:
A.
B.
C.
D.
Point 5 to 1
Point 3 to 4
Line A to B
Line A to C
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 3-2
Level: Moderate
McConnell - Chapter 003 #127
Topic: Determinants of supply
McConnell - Chapter 003
31.
Refer to the above table. If supply decreased by 2 units at each price, what would the new
equilibrium price and quantity be?
A.
B.
C.
D.
$3 and 5 units
$4 and 4 units
$5 and 5 units
$6 and 6 units
AACSB: Analytic
Bloom's: Application
Learning Objective: 3-4
Level: Moderate
McConnell - Chapter 003 #252
Topic: Changes in equilibrium price and quantity
32.
If the price elasticity of demand for a good is .75, the demand for the good can be described as:
A.
B.
C.
D.
Normal
Elastic
Inferior
Inelastic
AACSB: Analytic
Bloom's: Application
Learning Objective: 6-1
Level: Difficult
McConnell - Chapter 006 #2
Topic: Price elasticity of demand
9
McConnell - Chapter 006
33.
Which demand curve above is relatively more elastic between P1 and P2?
A.
B.
C.
D.
D1
D2
D3
D4
AACSB: Analytic
Bloom's: Application
Learning Objective: 6-1
Level: Moderate
McConnell - Chapter 006 #6
Topic: Price elasticity of demand
34.
Which demand curve above is perfectly inelastic?
A.
B.
C.
D.
D2
D3
D4
D5
AACSB: Analytic
Bloom's: Application
Learning Objective: 6-1
Level: Easy
McConnell - Chapter 006 #7
Topic: Price elasticity of demand
McConnell - Chapter 006
10
35.
Refer to the above graphs. A price increase from $20 to $40 causes quantity demanded to decrease
from 100 units to 50 units. Which graph best illustrates the price elasticity of demand for this good?
A.
B.
C.
D.
Graph A
Graph B
Graph C
Graph D
AACSB: Analytic
Bloom's: Application
Learning Objective: 6-1
Level: Easy
McConnell - Chapter 006 #14
Topic: Price elasticity of demand
36.
Which is not characteristic of a product with relatively inelastic demand?
A.
B.
C.
D.
The good is regarded by consumers as a necessity
There are a large number of good substitutes for the good
Buyers spend a small percentage of their total income on the product
Consumers have had only a short time period to adjust to changes in price
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 6-1
Level: Difficult
McConnell - Chapter 006 #63
Topic: Determinants of price elasticity
37.
The satisfaction or pleasure one gets from consuming a good or service is:
A.
B.
C.
D.
Price
Utility
Consumption
Preferences
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 7-1
Level: Easy
McConnell - Chapter 007 #1
Topic: Utility; law of diminishing marginal utility
38.
Total utility is best defined by which of the following?
A.
B.
C.
D.
The change in marginal utility multiplied by the price of a product
The maximum amount of satisfaction from consuming a product
The total satisfaction received from consuming a particular amount of a product
The additional satisfaction received from consuming one more unit of a product
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 7-1
Level: Easy
McConnell - Chapter 007 #3
Topic: Utility; law of diminishing marginal utility
39.
Which of the following defines marginal utility?
A. The change in total utility divided by the price of a product
B. The maximum amount of satisfaction from consuming a product
C. The total satisfaction received from consuming as much of the product that is available for
consumption
D. The additional satisfaction received from consuming one more unit of a product
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 7-1
Level: Easy
McConnell - Chapter 007 #5
Topic: Utility; law of diminishing marginal utility
11
40.
Which best expresses the law of diminishing marginal utility?
A. The more consumption of a product, the smaller is the total and marginal utility from the
consumption
B. The less consumption of a product, the greater is the total and marginal utility of the consumption
C. The more consumption of a product, the smaller is the marginal utility from consuming an
additional unit
D. The more consumption of a product, the smaller is the total and marginal utility from the
consumption
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 7-1
Level: Moderate
McConnell - Chapter 007 #6
Topic: Utility; law of diminishing marginal utility
41.
After eating four slices of pizza, you are offered a fifth slice. You turn down the slice. Your refusal
indicates that the:
A.
B.
C.
D.
Marginal utility for pizza slices is negative
Total utility for pizza slices is negative
Marginal utility is positive for the fourth slice and negative for the fifth slice
Total utility was positive for the fourth slice and negative for the fifth slice
AACSB: Reflective
Bloom's: Application
Learning Objective: 7-1
Level: Easy
McConnell - Chapter 007 #7
Topic: Utility; law of diminishing marginal utility
McConnell - Chapter 007
42.
Refer to the above table. What is the marginal utility of the fourth unit?
A.
B.
C.
D.
4
8
27
31
AACSB: Analytic
Bloom's: Application
Learning Objective: 7-1
Level: Easy
McConnell - Chapter 007 #26
Topic: Utility; law of diminishing marginal utility
43.
Refer to the above table. Marginal utility becomes negative with the consumption of the:
A.
B.
C.
D.
Second unit
Third unit
Fourth unit
Fifth unit
AACSB: Analytic
Bloom's: Application
Learning Objective: 7-1
Level: Moderate
McConnell - Chapter 007 #29
Topic: Utility; law of diminishing marginal utility
12
44.
If a rational consumer is in equilibrium, then:
A. The marginal utility obtained from one product is equal to the marginal utility obtained from any
other product
B. A reallocation of income would increase the consumer's total utility
C. The marginal utility per last dollar spent is the same for all goods consumed
D. Total utility becomes zero
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 7-2
Level: Moderate
McConnell - Chapter 007 #41
Topic: Utility-maximizing rule
45.
The increase in demand for iPods can be explained by:
A.
B.
C.
D.
An increase in the technology used to produce iPods
A reduction in the price of CD players
Improved portability and storage as compared to CD players
A decrease in the price of iPods
AACSB: Analytic
Bloom's: Application
Learning Objective: 7-3
Level: Moderate
McConnell - Chapter 007 #90
Topic: Applications; extensions
McConnell - Chapter 007
13
46.
Consider the above graphs A through D, which depict the total utility a consumer receives from
consuming good X. The principle of diminishing marginal utility is best illustrated by:
A.
B.
C.
D.
Graph A
Graph B
Graph C
Graph D
AACSB: Analytic
Bloom's: Application
Learning Objective: 7-1
Level: Moderate
McConnell - Chapter 007 #23
Topic: Utility; law of diminishing marginal utility
47.
Jon Brooks quit his job in a bicycle shop, where he earned $15,000 per year, to become a graduate
student in economics. At the university he attended, he spent $2,000 on books, $1,000 on cough
medicine, and earned $12,000 as an economics instructor. What were Jon's economic costs while
attending college?
A.
B.
C.
D.
$18,000
$15,000
$6,000
$3,000
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-1
Level: Moderate
McConnell - Chapter 008 #1
Topic: Costs: explicit and implicit
48.
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 2 hours. You value your time at $11.00 an hour. The tax specialist will charge
you $55 an hour. The opportunity cost of preparing your own tax return is:
A.
B.
C.
D.
$40
$55
$110
$165
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-1
Level: Easy
McConnell - Chapter 008 #2
Topic: Costs: explicit and implicit
49.
Cash expenditures a firm makes to pay for resources are called:
A.
B.
C.
D.
Implicit costs
Explicit costs
Normal profit
Opportunity costs
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-1
Level: Easy
McConnell - Chapter 008 #5
Topic: Costs: explicit and implicit
14
50.
If a firm's revenues just cover all its opportunity costs, then:
A.
B.
C.
D.
Normal profit is zero
Economic profit is zero
Total revenues equal its explicit costs
Total revenues equal its implicit costs
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-1
Level: Moderate
McConnell - Chapter 008 #13
Topic: Profits
51.
Economic profit is:
A.
B.
C.
D.
Total revenues minus fixed costs
Total revenues from sales minus the cost of materials
Total revenues minus the opportunity cost of the inputs
Gross profit minus selling and operating expenses
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-1
Level: Difficult
McConnell - Chapter 008 #15
Topic: Profits
52.
Economic profit for a company is defined as the total revenues of the firm minus the:
A.
B.
C.
D.
Opportunity cost of all resources
Explicit costs of production
Implicit cost of production
Accounting profit
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-1
Level: Difficult
McConnell - Chapter 008 #18
Topic: Profits
53.
Which statement is false?
A.
B.
C.
D.
The short run refers to the same calendar time period for all industries
In the long run, all inputs can vary
Firms may operate at a loss in the short run
In the long run, firms do not operate at a loss
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Moderate
McConnell - Chapter 008 #27
Topic: Short run versus long run
54.
The short run is a time period in which:
A.
B.
C.
D.
All resources are fixed
The level of output is fixed
The size of the production plant is variable
Some resources are fixed and others are variable
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #29
Topic: Short run versus long run
15
55.
Which statement is correct?
A.
B.
C.
D.
In the short run the plant capacity is variable
In the long run the plant capacity is variable
In the long run the plant capacity is fixed
In the short run, all resources are variable
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #31
Topic: Short run versus long run
56.
Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly
line basis?
A.
B.
C.
D.
An increase in the amount of aluminum the firm buys
A change in the production managers of the assembly line
A change in the production to a redesigned, new model car
An increase in the number of shifts of workers from two to three
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-2
Level: Moderate
McConnell - Chapter 008 #33
Topic: Short run versus long run
57.
The difference between the short run and the long run is that the short run can be characterized as a:
A.
B.
C.
D.
"variable" plant period while the long run is a "fixed" plant period
"fixed" plant period while the long run is a "variable" plant period
"fixed output" period while the long run is a "variable output" period
"variable output" period while the long run is a "fixed output" period
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Moderate
McConnell - Chapter 008 #34
Topic: Short run versus long run
58.
According to the law of diminishing marginal returns, eventually:
A.
B.
C.
D.
Output must fall and then rise as additional units of input are employed
Additional inputs will no longer generate average output
The additional output generated by additional units of an input will diminish
The additional inputs necessary to produce an additional unit of output will diminish
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Moderate
McConnell - Chapter 008 #35
Topic: Law of diminishing returns
59.
The law of diminishing returns for a manufacturing plant of a fixed size implies that, eventually
employing one:
A.
B.
C.
D.
More worker will increase output per worker
More worker will decrease output per worker
Less worker will increase output per worker
Less worker will not affect output per worker
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Moderate
McConnell - Chapter 008 #39
Topic: Law of diminishing returns
16
60.
The law of diminishing returns only applies in cases where:
A.
B.
C.
D.
There 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
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #41
Topic: Law of diminishing returns
The next question(s) are based on the following table that provides information on the production of a
product that requires one variable input.
McConnell - Chapter 008
61.
Refer to the above table. There are increasing marginal returns through the:
A.
B.
C.
D.
First unit of variable input
Second unit of variable input
Third unit of variable input
Fourth unit of variable input
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #56
Topic: Law of diminishing returns
62.
Refer to the above table. Diminishing returns set in with the addition of the:
A.
B.
C.
D.
First unit of input
Second unit of input
Third unit of input
Fourth unit of input
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #57
Topic: Law of diminishing returns
17
McConnell - Chapter 008
63.
Refer to the above graph. It shows the marginal product of labor (MPL) and the average product of
labor (APL). At which point above does diminishing marginal returns set in?
A.
B.
C.
D.
Point A
Point B
Point C
Point D
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-2
Level: Moderate
McConnell - Chapter 008 #61
Topic: Law of diminishing returns
64.
Refer to the above graph. It shows the marginal product of labor (MPL) and the average product of
labor (APL). At which point are marginal and average product the same as labor is added?
A.
B.
C.
D.
Point A
Point B
Point C
Point D
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #62
Topic: Law of diminishing returns
65.
Refer to the above graph. It shows the marginal product of labor (MPL) and the average product of
labor (APL). At which point does the marginal product of labor become zero again?
A.
B.
C.
D.
Point A
Point B
Point C
Point D
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-2
Level: Easy
McConnell - Chapter 008 #63
Topic: Law of diminishing returns
18
66.
Which is not a fixed cost?
A.
B.
C.
D.
Monthly rent of $1,000 contractually specified in a one-year lease
An insurance premium of $50 per year, paid last month
An attorney's retainer of $50,000 per year
A worker's wage of $15 per hour
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-3
Level: Moderate
McConnell - Chapter 008 #78
Topic: Short-run costs
67.
If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units,
then:
A.
B.
C.
D.
Marginal cost is $50
Average fixed cost is $100
Average total cost is $100
Average variable cost is $150
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-3
Level: Moderate
McConnell - Chapter 008 #86
Topic: Short-run costs
McConnell - Chapter 008
68.
Refer to the above graph. It shows the total cost curves. Total fixed cost at output level Q2 is
measured by:
A.
B.
C.
D.
0B
AC
CD
DE
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-3
Level: Easy
McConnell - Chapter 008 #94
Topic: Short-run costs
19
69.
Refer to the above graph. It shows the total cost curves. Total cost at output level Q2 is measured
by:
A.
B.
C.
D.
0C
AD
CD
0D
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-3
Level: Easy
McConnell - Chapter 008 #95
Topic: Short-run costs
70.
Refer to the above graph. It shows the total cost curves. Total variable cost at output level Q2 is
measured by:
A.
B.
C.
D.
0C
AC
CD
0D
AACSB: Analytic
Bloom's: Application
Learning Objective: 8-3
Level: Easy
McConnell - Chapter 008 #96
Topic: Short-run costs
71.
When marginal cost is increasing:
A.
B.
C.
D.
Total cost must be increasing
Average total cost must be increasing
Average total cost must be decreasing
Average fixed costs might be increasing or decreasing
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-3
Level: Moderate
McConnell - Chapter 008 #100
Topic: Short-run costs
72.
As output increases, average fixed costs:
A.
B.
C.
D.
Increase
Decrease
Remain constant
First increase and then decrease
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 8-3
Level: Easy
McConnell - Chapter 008 #101
Topic: Short-run costs
73.
Mutual interdependence would tend to limit control over price in which market model?
A.
B.
C.
D.
Monopolistic competition
Pure competition
Pure monopoly
Oligopoly
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 9-1
Level: Moderate
McConnell - Chapter 009 #4
Topic: Four market models
20
74.
In which two market models would advertising be used most often?
A.
B.
C.
D.
Pure competition and monopolistic competition
Pure competition and pure monopoly
Monopolistic competition and oligopoly
Pure monopoly and oligopoly
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 9-1
Level: Moderate
McConnell - Chapter 009 #5
Topic: Four market models
75.
There is no control over price by firms in:
A.
B.
C.
D.
Oligopoly
Pure monopoly
Pure competition
Monopolistic competition
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 9-1
Level: Easy
McConnell - Chapter 009 #6
Topic: Four market models
76.
Under which market model are the conditions of entry into the market easiest?
A.
B.
C.
D.
Pure competition
Pure monopoly
Monopolistic competition
Oligopoly
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 9-1
Level: Easy
McConnell - Chapter 009 #7
Topic: Four market models
77.
A purely competitive firm does not try to sell more of its product by lowering its price below the
market price because:
A.
B.
C.
D.
Its competitors would not permit it
It can sell all it wants to at the market price
This would be considered unethical price chiseling
Its demand curve is inelastic, so total revenue will decline
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 9-2
Level: Easy
McConnell - Chapter 009 #23
Topic: Pure competition defined; demand curve
21
McConnell - Chapter 009
78.
Refer to the above graph for a firm in pure competition. Line A represents:
A.
B.
C.
D.
Total revenue
Average revenue
Average total cost
Average fixed cost
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-2
Level: Moderate
McConnell - Chapter 009 #36
Topic: Pure competition defined; demand curve
79.
Refer to the above graph for a firm in pure competition. Line B represents:
A.
B.
C.
D.
Total revenue
Marginal revenue
Average total cost
Average fixed cost
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-2
Level: Easy
McConnell - Chapter 009 #37
Topic: Pure competition defined; demand curve
80.
In pure competition, marginal revenue is:
A.
B.
C.
D.
Equal to total revenue
Equal to product price
Less than product price
Greater than product price
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 9-2
Level: Moderate
McConnell - Chapter 009 #41
Topic: Pure competition defined; demand curve
22
Use the table below to answer the next question(s) for a purely competitive firm.
McConnell - Chapter 009
81.
Refer to the above table. The marginal revenue from the third unit of output is:
A.
B.
C.
D.
$40
$50
$120
$160
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Moderate
McConnell - Chapter 009 #57
Topic: Profit maximization in the short run
McConnell - Chapter 009
82.
Refer to the above graph. To maximize profits, this firm would produce:
A.
B.
C.
D.
0D units, which will result in a loss equal to ABGH
0E units, which will result in a loss equal to ALFH
0D units, which will result in economic profits equal to BCFG
0E units, which will result in economic profits equal to ABGH
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Easy
McConnell - Chapter 009 #87
Topic: Profit maximization in the short run
23
83.
Refer to the above graph. At the profit-maximizing level of output there will be:
A.
B.
C.
D.
A loss equal to ABGH
A loss equal to ALFH
Economic profits equal to BCFG
Economic profits equal to ABGH
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Easy
McConnell - Chapter 009 #88
Topic: Profit maximization in the short run
McConnell - Chapter 009
84.
Consider the purely competitive firm pictured above. The firm is earning:
A.
B.
C.
D.
Normal profits, since its price is above AVC
Economic profits, since its price is above AVC
Normal profits, since its price just covers ATC
Losses, since it is operating at the shutdown point
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Moderate
McConnell - Chapter 009 #93
Topic: Profit maximization in the short run
24
McConnell - Chapter 009
85.
Refer to the above graph. It represents a profit-maximizing firm producing under conditions of pure
competition. When the firm is in equilibrium in the short run, its average fixed cost is:
A.
B.
C.
D.
EH
DE
DH
DB
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Moderate
McConnell - Chapter 009 #100
Topic: Profit maximization in the short run
86.
Refer to the above graph. It represents a profit-maximizing firm producing under conditions of pure
competition. When the firm is in equilibrium in the short run, its average variable cost is:
A.
B.
C.
D.
EH
DE
DH
DB
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Moderate
McConnell - Chapter 009 #101
Topic: Profit maximization in the short run
87.
Refer to the above graph. It represents a profit-maximizing firm producing under conditions of pure
competition. When the firm is in equilibrium in the short run, the amount of economic profit per unit
is:
A.
B.
C.
D.
EH
DE
DH
DB
AACSB: Analytic
Bloom's: Application
Learning Objective: 9-3
Level: Moderate
McConnell - Chapter 009 #102
Topic: Profit maximization in the short run
25
88.
One defining characteristic of pure monopoly is that:
A.
B.
C.
D.
The monopolist is a price taker
The monopolist uses advertising
The monopolist produces a product with no close substitutes
There is relatively easy entry into the industry, but exit is difficult
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 10-1
Level: Easy
McConnell - Chapter 010 #3
Topic: Monopoly concept; definition
89.
Which phrase would be most characteristic of pure monopoly?
A.
B.
C.
D.
Close substitutes
Efficient advertiser
Price taker
Single seller
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 10-1
Level: Easy
McConnell - Chapter 010 #4
Topic: Monopoly concept; definition
McConnell - Chapter 010
90.
Refer to the above graph showing the short-run revenue curves for a monopolist. What price should
be charged in order to maximize total revenue?
A.
B.
C.
D.
P1
P2
P3
P4
AACSB: Analytic
Bloom's: Application
Learning Objective: 10-1
Level: Easy
McConnell - Chapter 010 #34
Topic: Monopoly demand curve
26
91.
Refer to the above graph showing the short-run revenue curves for a monopolist. At what output level
is demand inelastic?
A.
B.
C.
D.
Q1
Q2
Q3
Q4
AACSB: Analytic
Bloom's: Application
Learning Objective: 10-1
Level: Difficult
McConnell - Chapter 010 #37
Topic: Monopoly demand curve
McConnell - Chapter 010
92.
Refer to the above graph. The profit-maximizing monopolist in it will set its price and output at:
A.
B.
C.
D.
0J and 0V, respectively
0G and 0Y, respectively
0K and 0T, respectively
0H and 0X, respectively
AACSB: Analytic
Bloom's: Application
Learning Objective: 10-2
Level: Moderate
McConnell - Chapter 010 #73
Topic: Profit maximization
27
McConnell - Chapter 010
93.
Refer to the above graph. Consider a monopolist in short-run equilibrium. This monopolist:
A.
B.
C.
D.
Has total fixed costs equal to area BEFC
Has total variable costs equal to area 0CFQ
Earns economic profit equal to the area of ABED
Will cease production since its economic profits are negative
AACSB: Analytic
Bloom's: Application
Learning Objective: 10-2
Level: Difficult
McConnell - Chapter 010 #87
Topic: Profit maximization
94.
A major characteristic of monopolistic competition is:
A.
B.
C.
D.
Mutual interdependence
A high degree of collusion among firms
A relatively large number of firms selling the product
Relatively easy entry into an industry, but a relatively difficult exit from the industry
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 11-1
Level: Easy
McConnell - Chapter 011 #2
Topic: Monopolistic competition: definition; characteristics
28
The graph depicts a monopolistically competitive firm
McConnell - Chapter 011
95.
Refer to the above graph. In the short run, this monopolistically competitive firm will set price at:
A.
B.
C.
D.
$65 and produce 45 units of output
$65 and produce 35 units of output
$50 and produce 35 units of output
$50 and produce 50 units of output
AACSB: Analytic
Bloom's: Application
Learning Objective: 11-2
Level: Moderate
McConnell - Chapter 011 #32
Topic: Price-output behavior
McConnell - Chapter 011
29
96.
Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically
competitive firm would be represented by graph:
A.
B.
C.
D.
A
B
C
D
AACSB: Analytic
Bloom's: Application
Learning Objective: 11-2
Level: Moderate
McConnell - Chapter 011 #63
Topic: Price-output behavior
97.
When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise
restrict competition, they are practicing the strategy of:
A.
B.
C.
D.
Interindustry competition
Limit pricing
Price leadership
Collusion
AACSB: Analytic
Bloom's: Knowledge
Learning Objective: 11-4
Level: Easy
McConnell - Chapter 011 #142
Topic: Game theory
Answer the next question(s) based on the following payoff matrix for a duopoly in which the
numbers indicate the profit in millions of dollars for a high-price or a low-price strategy
McConnell - Chapter 011
98.
Refer to the above payoff matrix. If both firms collude to maximize joint profits, the total profits for
the two firms will be:
A.
B.
C.
D.
$350 million
$400 million
$500 million
$525 million
AACSB: Analytic
Bloom's: Application
Learning Objective: 11-4
Level: Moderate
McConnell - Chapter 011 #146
Topic: Game theory
30
99.
Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy while firm A
maintains a high-price strategy. Compared to the results from a high-price strategy for both firms,
firm B will now:
A.
B.
C.
D.
Lose $75 million in profit and firm A will gain $50 million in profit
Gain $50 million in profit and firm A will lose $50 million in profit
Gain $75 million in profit and firm A will lose $50 million in profit
Gain $50 million in profit and firm A will lose $75 million in profit
AACSB: Analytic
Bloom's: Application
Learning Objective: 11-4
Level: Difficult
McConnell - Chapter 011 #147
Topic: Game theory
Answer the next question(s) based on the following payoff matrix for a duopoly in which the
numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy
McConnell - Chapter 011
100.
Refer to the above payoff matrix. If both firms operate independently and do not collude, the most
likely profit is:
A.
B.
C.
D.
$400,000 for firm X and $400,000 for firm Y
$725,000 for firm X and $475,000 for firm Y
$475,000 for firm X and $725,000 for firm Y
$625,000 for firm X and $625,000 for firm Y
AACSB: Analytic
Bloom's: Application
Learning Objective: 11-4
Level: Moderate
McConnell - Chapter 011 #151
Topic: Game theory
31
3-7-11 Cumulative Review Summary
Category
AACSB: Analytic
AACSB: Analytical Skills
AACSB: Reflective
Bloom's: Application
Bloom's: Comprehension
Bloom's: Knowledge
Learning Objective: 1-1
Learning Objective: 1-4
Learning Objective: 1-5
Learning Objective: 10-1
Learning Objective: 10-2
Learning Objective: 11-1
Learning Objective: 11-2
Learning Objective: 11-4
Learning Objective: 2-1
Learning Objective: 2-2
Learning Objective: 3-1
Learning Objective: 3-2
Learning Objective: 3-4
Learning Objective: 6-1
Learning Objective: 7-1
Learning Objective: 7-2
Learning Objective: 7-3
Learning Objective: 8-1
Learning Objective: 8-2
Learning Objective: 8-3
Learning Objective: 9-1
Learning Objective: 9-2
Learning Objective: 9-3
Level: Difficult
Level: Easy
Level: Moderate
McConnell - Chapter 001
McConnell - Chapter 002
McConnell - Chapter 003
McConnell - Chapter 006
McConnell - Chapter 007
McConnell - Chapter 008
McConnell - Chapter 009
McConnell - Chapter 010
McConnell - Chapter 011
Topic: Applications; extensions
Topic: Changes in equilibrium price and quantity
Topic: Characteristics of the market system
Topic: Costs: explicit and implicit
Topic: Demand and demand curve
Topic: Determinants of demand
1
# of Questions
87
10
3
44
1
55
6
2
2
4
2
1
2
4
1
3
13
3
1
5
8
1
1
6
13
7
4
4
7
17
37
46
12
4
19
7
12
29
20
9
11
1
1
2
3
7
6
Topic: Determinants of price elasticity
Topic: Determinants of supply
Topic: Economic systems
Topic: Economics; economic perspective
Topic: Five fundamental questions
Topic: Four market models
Topic: Game theory
Topic: Law of diminishing returns
Topic: Monopolistic competition: definition; characteristics
Topic: Monopoly concept; definition
Topic: Monopoly demand curve
Topic: Positive and normative economics
Topic: Price elasticity of demand
Topic: Price-output behavior
Topic: Production possibilities model
Topic: Profit maximization
Topic: Profit maximization in the short run
Topic: Profits
Topic: Pure competition defined; demand curve
Topic: Short run versus long run
Topic: Short-run costs
Topic: Society's economizing problem
Topic: Unemployment, growth, and the future
Topic: Utility-maximizing rule
Topic: Utility; law of diminishing marginal utility
2
1
3
1
5
1
4
4
8
1
2
2
1
4
2
1
2
7
3
4
5
7
2
1
1
8