economics data bank

37.The local pizza restaurant makes such great bread sticks that consumers do not respond much to a change in the price. If the owner is only interested in increasing revenue, he would

a.lower the price of the bread sticks.

b.leave the price of the bread sticks alone.

c.raise the price of the bread sticks

d.none of the above are correct.

38.Which of the following statements is false?

a.When the marginal product of labor is upward?sloping, the marginal cost curve is

upward?sloping.

b.The average fixed cost curve is downward?sloping and approaches the horizontal

axis.

c.The marginal cost curve intersects the average variable cost curve at the

minimum of average variable cost.

d.When the marginal cost curve is above the average cost curve, the average cost

curve is upward?sloping.

39.Suppose that Carolyn receives a pay increase. We would expect

a.Carolyn’s?demand for normal goods to remain unchanged.

b.Carolyn’s?demand for inferior goods to decrease.

c.Carolyn’s?demand for luxury goods to decrease.

d.Carolyn’s?demand for normal goods to decrease.

40.Scenario 1.Imagine that two oil companies, Lexxon and PB, own adjacent oil fields. Under the fields is a common pool of oil worth $48 million. Drilling a well to recover oil costs $4 million per well. If each company drills one well, each will get half of the oil and earn a $20 million profit ($24 million in revenue ? $4 million in costs). Assume that each firm can drill either one or two wells and having X percent of the total wells means that a company will collect X percent of the total revenue.

Refer to Scenario 1. PB would adopt what sort of well?drilling strategy in a Nash equilibrium?

a.PB will never drill a second well.

b.PB will always drill a second well.

c.PB will drill a second well only if Lexxon drills a well.

d.PB will drill a second well only if Lexxon does not drill a well.

41.Suppose a monopolist faces the following conditions. The firm is currently producing 20,000 units and generating $40,000 revenues. At the current level of production, the firm has the minimum average total cost that is equal to $2. In addition, at this level of production, the firm’s average variable cost is $1. What should the monopolist firm do to maximize its profit in the short run?

a.Increase output level and decrease price

b.Decrease output level and increase price

c.Do nothing

d.Shut down immediately

42.The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses and many sellers have left the industry. Economic theory suggests that these conditions willa.shift the demand curve outward so that price will rise to the level of production cost.

b.cause the remaining firms to collude so that they can produce more efficiently.

c.cause the market supply to decline and the price of textiles to rise.

d.cause firms in the textile industry to suffer long?run economic losses.

43.Which of the following would not shift the demand curve for a good or service?

a.a change in income.

b.a change in the price of the good or service

c.a change in expectations about the price of the good or service.

d.a change in the price of a related good.

44.For the same amount of pollution emitted, an emissions tax is said to be more efficient than an environmental standard because all polluters:

a.emit pollution up to the point at which the marginal benefit of polluting is equal

to the emissions tax.

b.emit the same amount of pollution, regardless of the marginal benefit of

polluting.

c.pay the same total tax bill for their pollution.

d.reduce pollution emissions to zero.

45.An important difference between the situation faced by a profit?maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

a.price may exceed marginal revenue; in the long run, price equals marginal

revenue.

b.price may exceed marginal cost; in the long run, price equals marginal cost.

c.price may exceed average total cost; in the long run, price equals average total

cost.

d.there are many firms in the market; in the long run, there are only a few firms in

the market.

46.You lose your job and as a result you buy fewer mystery books. This shows that you consider mystery books as a/ana.normal good

b.inferior good

c.luxury good

d.comple

47.Generally a firm is more willing and able to increase quantity supplied in response to a price change when

a.the relevant time period is short rather than long

b.the relevant time period is long rather than short

c.supply is inelastic

d.the firm is experiencing capacity problems.

48.Public goods should be produced up to the point at which the marginal cost of production equals:

a.the maximum price any individual is willing to pay for that unit.

b.the sum of the individual marginal benefits from all consumers of that unit.

c.zero, which is the marginal cost of allowing another individual to consume the

good.

d.the highest marginal benefit from any individual consumer of the good.

49.The profit?maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

a.A competitive firm maximizes profit at the point where marginal revenue equals

marginal cost; a monopolist maximizes profit at the point where marginal

revenue exceeds marginal cost.

b.A competitive firm maximizes profit at the point where average revenue equals

marginal cost; a monopolist maximizes profit at the point where average

revenue exceeds marginal cost.

c.For a competitive firm, marginal revenue at the profit?maximizing level of output

is equal to marginal revenue at all other levels of output; for a monopolist,

marginal revenue at the profit?maximizing level of output is smaller than it is for

larger levels of output.

d.For a profit?maximizing competitive firm, thinking at the margin is much more

important than it is for a profit?maximizing monopolist.

50.Which one of the following descriptions is not suitable for monopolistic competition?

a.There is no profit in the long run.

b.It is easy for a new firm to enter the industry.

c.It has a supply curve with a positive slope.

d.It has market power.