Excess supply in an unregulated market will cause

1. Excess supply in an unregulated market will cause the price of a product to fall.A)

True

B)

False

2. An increase in demand will cause the equilibrium price and quantity to rise.A)

True

B)

False

3. People will buy more of a normal good when their income decreases.A)

True

B)

False

4. An increase or decrease in population will increase or decrease demand.A)

True

B)

False

5. Remember the application on "Electricity from the Wind." The federal tax credit for wind generated electricity increased the supply of electricity leading to a higher equilibrium quantity and lower equilibrium price.A)

True

B)

False

6. If a 10% increase in price decreases the quantity demanded by 12%, the price elasticity of demand is 1.2.A)

True

B)

False

7. Demand for a particular brand of clothing is likely to be less elastic than demand for all clothing.A)

True

B)

False

8. The price elasticity of demand for business travel tends to be greater than that of leisure travel.A)

True

B)

False

9. If the elasticity of demand is .5, then a 20% change in price will lead to a 10% change in quantity demanded.A)

True

B)

False

10. Economic cost differs from accounting cost because accountants do not consider implicit costs.A)

True

B)

False

11. Implicit cost is the opportunity cost of the inputs that do not require monetary payment.A)

True

B)

False

12. Diminishing marginal returns always sets in with the hiring of the first worker.A)

True

B)

False

13. Fixed costs do not vary as output changes.A)

True

B)

False

14. The increase in total cost resulting from producing one more unit of output is the marginal cost.A)

True

B)

False

15. For a perfectly competitive firm, price always equals marginal revenue.A)

True

B)

False

16. Firms earning negative profits in the short run should always shut down.A)

True

B)

False

17. In the long-run perfectly competitive equilibrium, firms produce at the minimum of average total cost.A)

True

B)

False

18. A monopolist's marginal cost is less than the price it charges.A)

True

B)

False

19. A monopolist picks the quantity of output at which price equals marginal cost.A)

True

B)

False

20. Monopolists earn excessive profits by increasing their quantity produced above the competitive market outcome.A)

True

B)

False

21. Monopolistically competitive industries have only a single firm and there is a barrier to entry.A)

True

B)

False

22. The market for laundry detergent is monopolistically competitive because products differ by physical characteristics such as scent, stain fighting ingredients, etc.A)

True

B)

False

23. An example of a monopolistically competitive industry is cable television service.A)

True

B)

False

24. Monopolistically competitive firms offer consumers more variety than perfectly competitive firms.A)

True

B)

False

25. Protecting endangered species is not an example of a public good because there are no external benefits associated with it.A)

True

B)

False

26. It is efficient to reduce pollution to zero.A)

True

B)

False

27. It is efficient not to alter the amount of pollution produced by the market.A)

True

B)

False

28. Pollution imposes costs on other than those involved in producing or consuming the product that produces pollution.A)

True

B)

False

29. Under a system of pollution taxes we expect firms to cut pollution until the marginal benefit from tax savings equals the marginal increase in production costs due to decreasing pollution.A)

True

B)

False

30. A pollution tax internalizes the costs of pollution a firm is imposing on others.A)

True

B)

False

31. Under a system of marketable pollution permits, a firm with relatively low abatement costs will buy permits from a firm with relatively high abatement costs.A)

True

B)

False

32. Marketable pollution permits increase the amount of pollution generated because firms that don't want to reduce pollution can buy the right to pollute.A)

True

B)

False

33. Marginal revenue product is the additional revenue for the firm when it hires one additional unit of labor.A)

True

B)

False

34. Marginal revenue product equals marginal revenue time the price of output.A)

True

B)

False

35. The wage for a particular occupation will be relatively low if supply is small relative to demand.A)

True

B)

False

36. An increase in the market supply of clerks leads to an increase in the market wage rate for clerks.A)

True

B)

False

37. Airline pilots make more than bus drivers in part because the training costs of being an airline pilot are higher.A)

True

B)

False

38. Labor unions may increase worker productivity by facilitating smooth relations between labor and management.A)

True

B)

False

39. A possible benefit of unions is lower turnover among workers, which in turn leads to lower training costs.A)

True

B)

False

40. The Taft-Hartley Act guaranteed workers the right to join unions.A)

True

B)

False