Question 1
When a second firm enters a monopolist's market __________ .
A. market price will rise
B. the quantity produced by the first firm will decrease
C. the first firm's profits increase
D. All of the above will occur.
Question 2
Price discrimination always benefits __________ .
A. the firm and may benefit or harm the consumer
B. the consumer and may benefit or harm the firm
C. consumers and firms
D. consumers only
Question 3
The four-firm concentration ratio for the cigarette market is 93%. This means that __________ .
A. the four largest firms in the market produce 93% of the total market output
B. the market is an oligopoly
C. there is a high degree of concentration in the cigarette market
D. all of the above
Question 4
Which of the following is NOT a characteristic of a perfectly competitive market?
A. a large number of firms in a market
B. selling a standardized product
C. substantial barriers to entry
D. an individual firm having no control over price
Question 5
Which of the following would NOT be considered price discrimination?
A. charging business travelers more money than leisure travelers for plane tickets
B. charging houses in expensive neighborhoods more money for mowing the same size lawn than in a less expensive neighborhood
C. charging a lower price for dry cleaning men's shirts than women's shirts
D. charging more money for a large luxury car than a small economy car
Question 6
You notice that the price of butter rises and then falls. The best explanation for this is that __________ .
A. demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down
B. demand for butter decreased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down
C. demand for butter increased causing price to rise, which induced other firms to exit the market causing supply to decrease, which caused the price to go back down
D. demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to decrease, which caused the price to go back down
Question 7
The four-firm concentration ratio measures the __________ .
A. percentage of total output in a market produced by the four largest firms
B. elasticity of demand of the four largest firms in an industry
C. average cost of the four largest firms in an industry
D. number of firms in an industry
Question 8
Suppose that there are five firms in a market, each controlling 20% of the market. The HHI would equal __________ .
A. 10
B. 100
C. 1,000
D. 2,000
Question 9
When a second firm enters a monopolist's market __________ .
A. market price will rise
B. the quantity produced by the first firm will increase
C. the first firm's profits will decrease
D. All of the above will occur.
Question 10
A market served by only one firm is called a(n. __________ .
A. perfectly competitive market
B. monopoly
C. oligopoly
D. Any of the above could be correct.
Question 11
Which of the following is NOT a barrier to entry for monopoly?
A. a patent
B. government licensing
C. large economies of scale
D. a large number of existing firms in a market
Question 12
In which of the following market structures do you find no barriers to entry?
A. monopoly
B. perfect competition
C. monopolistic competition
D. monopolistic competition and perfect competition
Question 13
When a few firms sell similar products in a market, the market structure is most likely to be __________ .
A. a perfectly competitive market
B. a monopoly
C. a monopolistically competitive market
D. an oligopoly
Question 14
What is the characteristic of a perfectly competitive firm that causes it to be a price taker?
A. many buyers and sellers
B. homogeneous product
C. free entry and exit
D. A and B are correct.
Question 15
Which of the following would NOT be considered price discrimination?
A. charging more money for long-distance calls during business hours than on weekends
B. giving students a discount on ski lift tickets
C. charging higher rates for oil delivery to people who live farther from your business
D. charging less money to wash a large luxury car than a small economy car
Question 16
When a second firm enters a monopolist's market __________ .
A. the former monopolist's average cost decreases as its output level decreases
B. the demand curve the former monopolist faces shifts to the left
C. the market price rises as the average cost increases
D. none of the above
Question 17
In which of the following market structures can you find differentiated products?
A. monopoly
B. perfect competition
C. oligopoly
D. monopolistic competition and oligopoly
Question 18
When a second firm enters a monopolist's market __________ .
A. market price will drop
B. sales for the first firm will rise
C. the first firm's profits will increase
D. All of the above will occur.
Question 19
Market power is the power to __________ .
A. control prices
B. gain another firm's customers
C. reduce price below cost to deter entry
D. control output
Question 20
When there are just a few firms in an industry, the industry structure is most likely to be __________ .
A. a perfectly competitive industry
B. an oligopoly market
C. a monopoly market
D. a natural monopoly market
Question 21
The marginal revenue product of labor is the __________ .
A. change in labor necessary to produce an additional unit of output
B. cost of additional labor necessary to produce an additional unit of output
C. change in output resulting from adding an additional unit of labor
D. change in revenue resulting from adding an additional unit of labor
Question 22
Suppose that differences in skills explain part of the difference in wages by race. Wage differences arising from skill differences __________ .
A. may result from past discrimination in access to education
B. are not attributable to present or past discrimination
C. will disappear when labor markets are in equilibrium
D. are always classified as racial discrimination
Question 23
People who complete college provide a signal to employers about their skills and thus face better employment opportunities than equally skilled high school graduates. This is called __________ .
A. the learning effect of a college education
B. the signaling effect of a college education
C. the discriminatory effect of a college education
D. none of the above
Question 24
The poverty rate in the United States is highest for __________ .
A. married couples
B. childless households
C. female headed households
D. single people
Question 25
In order to practice price discrimination, a firm must be in a market such that the consumers in its market __________.
A. have identical tastes
B. have identical elasticity of demand
C. have different elasticity of demand
D. have the same demand for its product
Question 26
One reason that professional baseball players earn higher incomes than college professors is that __________ .
A. the training costs to enter the baseball profession are low
B. there no barriers to entry in the baseball profession
C. few people have the skill to play professional baseball
D. being a college professor requires less education
Question 27
Suppose that a minimum wage is set that is higher than wages for retail workers. This is __________ news for shoppers and __________ retail workers.
A. bad; good news for some, but not all
B. bad; good news for all
C. good; good news for some but not all
D. good; good news for all
Question 28
A curve that shows the relationship between the wage and the quantity of labor demanded in the short run is __________ .
A. the marginal revenue product of labor curve
B. the marginal revenue curve
C. the marginal product of labor curve
D. none of the above
Question 29
Compared to the typical high-school graduate, the typical college graduate has greater human capital and thus more options for both low-skill and high-skill jobs. This is called __________ .
A. the signaling effect of a college education
B. the learning effect of a college education
C. the discriminatory effect of a college education
D. all of the above
Question 30
Which of the following is the most important reason for growing inequality in the income distribution in the United States?
A. an increase in demand for highly educated workers
B. inheritances
C. discrimination
D. a steady increase in tuition and fees for a college education
Question 31
Which of the following explains the impact of the expansion of international trade on the demand for less skilled workers in the United States?
A. An increase in international trade has increased the demand for less skilled workers.
B. An increase in international trade has decreased the demand for less skilled workers.
C. An increase in international trade has had little impact on the demand for less skilled workers.
D. The impact of the expansion of international trade on the demand for less skilled workers in the United States varies from year to year.
Question 32
Which of the following explains the impact of technological advances on the wage gap between less skilled workers and highly skilled workers?
A. Advances in technology have increased the demand for higher education degrees and widened the wage gap between the two groups.
B. Advances in technology have increased the productivity of less skilled workers and thus narrowed the wage gap between the two groups.
C. Advances in technology have increased the demand for less skilled workers and highly skilled workers alike, and thus the wage gap between the two groups remains unchanged.
D. none of the above
Question 33
When a firm hires a worker for one hour, the marginal cost to that firm equals the __________ .
A. hourly wage of that worker
B. diminishing marginal productivity of that worker
C. price of each item that the worker produces in that hour
D. average total cost of production at the quantity produced
Question 34
A minimum wage that is less than the prevailing market wage will __________ .
A. have no effect on the market
B. increase unemployment
C. increase wages
D. reduce wages
Question 35
Other things being equal, as diminishing marginal returns begin to occur, the marginal revenue product of labor __________ .
A. decreases as more workers are used
B. increases as more workers are used
C. remains unchanged as more workers are used
D. none of the above
Question 36
Which of the following is a main factor that explains the differences in the incomes of U.S. households?
A. inheritances
B. luck and misfortune
C. discrimination
D. all of the above
Question 37
The marginal product of labor is the __________ .
A. change in labor necessary to produce an additional unit of output
B. cost of additional labor necessary to produce an additional unit of output
C. change in output resulting from adding an additional unit of labor
D. change in revenue resulting from adding an additional unit of labor
Question 38
The price of an hour of leisure time is __________ .
A. the income that could have been earned in that hour
B. zero
C. the minimum wage rate
D. determined by the value of the activity the person engages in during that hour of leisure
Question 39
Given their skills and education, steelworkers earn higher incomes than they would in other occupations. This is partly because __________ .
A. steel workers face the higher risk of getting injured or killed
B. it is costly to acquire skills necessary for jobs at steel mills
C. few people have skills and knowledge required for jobs at steel mills
D. all of the above
Question 40
Suppose that we compare shares of income earned by different U.S. groups by dividing all households into five groups. Which of the following statements about the income distribution in the United States is correct?
A. Shares of income remain roughly constant as we move from the lowest quintile to the highest quintile.
B. Shares of income decrease as we move from the lowest quintile to the highest quintile.
C. Shares of income increase as we move from the lowest quintile to the highest quintile.
D. none of the above
