Download Microeconomics Test 3 Review: 54 Questions and Solutions and more Exams Economics in PDF only on Docsity!
questions and complete solutions.
Microeconomics Test 3 Review with 54
questions and complete solutions.
Honey producers provide a positive externality to orchards because:
A. the honey producers get more honey
B. the orchard owner frequently gets stung by the honey producer's bees
C. the orchard owner does not have to purchase bees to pollinate his flowers
D. the honey producers have to rent access to the orchard grounds - ANSWER C
A tariff is a:
A. limit on how much of a good can be exported
B. limit on how much of a good can be imported
C. tax on an exported good
D. tax on an imported good - ANSWER D
The market for corn in Wheatland consists solely on domestic buyers of corn and domestic sellers of corn if:
A. consumer surplus equals producer surplus in the Wheatland corn market
B. total surplus exceeds consumer surplus in the Wheatland corn market
C. Wheatland permits international trade in corn
D. Wheatland forbids international trade in corn - ANSWER D
If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price:
A. the country will be an exporter of the good
B. the country will be an importer of the good
C. the country will be neither an exporter nor an importer of the good
questions and complete solutions.
D. Additional info is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither. - ANSWER A
Externalities tend to cause markets to be:
A. inefficient
B. unequal
C. unnecessary
D. overwhelmed - ANSWER A
The provision of public goods gives rise to:
A. no externalities
B. positive externalities
C. negative externalities
D. rivalries in consumption - ANSWER B
When a good is excludable:
A. one person's use of the good diminishes another person's ability to use it.
B. people can be prevented from using the good
C. no more than one person can use the good at the same time
D. everyone will be excluded from using the good - ANSWER B
When goods do not have a price, which of the following primarily ensures that the good is produced?
A. buyers
B. sellers
C. government
D. the market - ANSWER C
Property rights are well established for:
questions and complete solutions.
B. cows are private goods, while elephants tend to roam freely without owners.
C. cows and elephants are public goods, but ivory is nonrival.
D. ivory is nonrival and nonexclusive, but beef is rival and exclusive - ANSWER B
Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so?
A. to prevent overuse
B. to decrease taxes
C. to fight poverty
D. to increase consumption - ANSWER A
Which parable describes the problem of wild animals that are hunted to the point of extinction?
A. Coase theorem
B. Tragedy of the Commons
C. Cost-benefit analysis
D. Clean Air Act - ANSWER B
Some costs do not vary with the quantity of output produced. Those costs are called:
A. marginal costs
B. average costs
C. fixed costs
D. explicit costs - ANSWER C
Which of the following statements is NOT correct?
A. fixed costs are constant
B. variable costs change as output changes
C. average fixed costs are constant
D. average total costs are typically U-shaped - ANSWER C
questions and complete solutions.
A production function describes:
A. how a firm maximizes profits
B. how a firm turns inputs into profits
C. the minimal cost of producing a given level of output
D. the relationship between cost and output - ANSWER B
Total revenue equals:
A. price x quantity
B. price/quantity
C. (price x quantity)- total cost
D. output-input - ANSWER A
Economists normally assume that the goal of a firm is to:
A. maximize its total revenue
B. maximize its profit
C. minimize its explicit costs
D. minimize its total cost - ANSWER B
If a firm produces nothing, which of the following costs will be zero?
A. total cost
B. fixed cost
C. opportunity cost
D. variable cost - ANSWER D
A sunk cost is one that:
A. changes as the level of output changes in the short run
questions and complete solutions.
Sam sells soybeans to a broker in Chicago, Illinois. Because the market for soybeans is generally considered to be competitive, Sam maximizes his profit by choosing:
A. to produce the quantity at which average variable cost is minimized
B. to produce the quantity at which average fixed cost is minimized
C. to sell at a price where marginal cost is equal to average total cost
D. the quantity at which the market price is equal to Sam's marginal cost of product - ANSWER D
Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is:
A. unit-elastic
B. perfectly inelastic
C. perfectly elastic
D. inelastic over a certain region - ANSWER C
Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company has:
A. less incentive to advertise than it would otherwise have
B. less market power than it would otherwise have
C. more control over the price of diamonds than it would otherwise have
D. higher profits than it would otherwise have - ANSWER B
For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which:
A. average revenue is zero
B. profit is maximized
C. total revenue is maximized
D. marginal cost is zero - ANSWER C
questions and complete solutions.
A monopoly market:
A. always maximizes total economic well-being.
B. always minimizes consumer surplus
C. generally fails to maximize total economic well-being
D. generally fails to maximize producer surplus - ANSWER C
Because monopoly firms do not have to compete with other firms, the outcome in a monopoly is often:
A. not in the best interest of society
B. one that fails to maximize total economic well-being
C. inefficient
D. all of the above are correct - ANSWER D
Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii)The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market.
A. (i) and (ii) only
B. (i) and (iii) only
C. (i), (ii), & (iii) only
D. (i), (ii), (iii), & (iv) - ANSWER A
For a monopoly:
A. average revenue exceeds marginal revenue
B. average revenue equals marginal revenue
C. average revenue is less than marginal revenue
D. price equals marginal revenue - ANSWER A
One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where:
questions and complete solutions.
B. consumer surplus increases and total surplus decreases in the market for that good.
C. consumer surplus decreases and total surplus increases in the market for that good.
D. consumer surplus decreases and total surplus decreases in the market for that good. - ANSWER C
The impact of one person's actions on the well-being of a bystander is called:
A. an economic dilemma
B. deadweight loss
C. a multi-party problem
D. an externality - ANSWER D
ALL externalities:
A. cause markets to fail to allocate resources efficiently
B. cause equilibrium prices to be too high
C. benefit producers at the expense of the consumer
D. cause equilibrium prices to be too low - ANSWER A
In the case of a technology spillover, the government can encourage firms to internalize a positive externality by:
A. taxing production, which would decrease supply
B. taxing production, which would increase supply
C. subsidizing production, which would decrease supply
D. subsidizing production, which would increase supply - ANSWER D
For private goods allocated in market:
A. prices guide the decisions of buyers and sellers and these decisions can lead to an efficient allocation of resources.
B. prices guide the decisions of buyers and sellers and these decisions can lead to an inefficient allocation of resources
questions and complete solutions.
C. the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources
D. the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources - ANSWER A
The provision of public goods generates:
A. positive externality, as does the use of a common resource
B. positive externality and the use of a common resource generates a negative externality
C. negative externality, as does the use of a common resource
D. negative externality and the use of a common resource generates a positive externality - ANSWER B
If people can be prevented from using a certain good, then that good is called:
A. rival in consumption
B. excludable
C. a common resource
D. a public good - ANSWER B
Which of the following goods is nonrival in consumption and excludable?
A. a tornado siren
B. an uncongested toll road
C. a home
D. the environment - ANSWER B
A vacation home in Malibu is:
A. not rival in consumption and excludable
B. rival in consumption and excludable
C. not rival in consumption and not excludable
D. rival in consumption and not excludable - ANSWER B
questions and complete solutions.
B. profit obtained from an additional unit of that input
C. total revenue obtained from an additional unit of that input
D. quantity of output obtained from an additional unit of that input - ANSWER D
Entry into a market by new firms will increase the:
A. supply of the good
B. profits of existing firms
C. price of the good
D. marginal cost of producing the good - ANSWER A
Price discrimination requires the firm to:
A. separate customers according to their willingness to pay
B. differentiate between different units of its product
C. engage in arbitrage
D. use coupons - ANSWER A
