Question 1

An increase in the price of an input to a perfectly competitive industry will:​

Accepted Answer

A) ​increase price and reduce the number of firms. 
B) ​increase price and increase the number of firms. 
C) ​increase price and have an ambiguous effect on the number of firms. 
D) ​reduce the number of firms and have an ambiguous effect on price. 
A) ​increase price and reduce the number of firms. 
B) ​increase price and increase the number of firms. 
C) ​increase price and have an ambiguous effect on the number of firms. 
D) ​reduce the number of firms and have an ambiguous effect on price. C

Question 2

In a competitive market,an efficient allocation of resources is characterized by:

Accepted Answer

A) a price greater than the marginal cost of production. 
B) the possibility of further mutually beneficial transactions. 
C) the largest possible sum of consumer and producer surplus. 
D) a value of consumer surplus equal to that of producer surplus. 
A) a price greater than the marginal cost of production. 
B) the possibility of further mutually beneficial transactions. 
C) the largest possible sum of consumer and producer surplus. 
D) a value of consumer surplus equal to that of producer surplus. C

Question 3

One example of Ricardian rent is:

Accepted Answer

A) rent paid to landlords under price controls. 
B) the difference between the price of a highly demanded unique piece of artwork and the opportunity cost of maintaining it. 
C) the amount paid to a seller above the equilibrium price of tourist class tickets in order to receive higher quality seats in first class. 
D) the price rise of wool from a disease among sheep. 
A) rent paid to landlords under price controls. 
B) the difference between the price of a highly demanded unique piece of artwork and the opportunity cost of maintaining it. 
C) the amount paid to a seller above the equilibrium price of tourist class tickets in order to receive higher quality seats in first class. 
D) the price rise of wool from a disease among sheep. B

Question 4

Firms in long-run equilibrium in a perfectly competitive industry will produce at the low points of their average total cost curves because:

Accepted Answer

A) free entry implies that long-run profits will be zero no matter how much each firm produces. 
B) firms seek maximum profits and to do so they must choose to produce where average costs are minimized. 
C) firms maximize profits and free entry implies that maximum profits will be zero. 
D) firms in the industry desire to operate efficiently. 
A) free entry implies that long-run profits will be zero no matter how much each firm produces. 
B) firms seek maximum profits and to do so they must choose to produce where average costs are minimized. 
C) firms maximize profits and free entry implies that maximum profits will be zero. 
D) firms in the industry desire to operate efficiently.

Question 5

One way to minimize the excess burden resulting from a specific tax is to:

Accepted Answer

A) tax only wealthy firms and individuals. 
B) spread the tax over many goods and services. 
C) tax goods for which either supply or demand is inelastic. 
D) tax luxury items such as yachts and sports cars. 
A) tax only wealthy firms and individuals. 
B) spread the tax over many goods and services. 
C) tax goods for which either supply or demand is inelastic. 
D) tax luxury items such as yachts and sports cars.

Question 6

A demand curve will shift out for any of the following reasons except that:

Accepted Answer

A) preference for a good increases. 
B) price of a substitute falls. 
C) income rises. 
D) price of a complement falls. 
A) preference for a good increases. 
B) price of a substitute falls. 
C) income rises. 
D) price of a complement falls.

Question 7

A deadweight loss of consumer and/or producer surplus occurs when:

Accepted Answer

A) producers fail to maximize profits. 
B) mutually beneficial transactions cannot be completed. 
C) consumers do not maximize their utility. 
D) the price of inputs increases. 
A) producers fail to maximize profits. 
B) mutually beneficial transactions cannot be completed. 
C) consumers do not maximize their utility. 
D) the price of inputs increases.

Question 8

refer to a market in which quantity demanded is given by   and quantity supplied by  
-If a small unit tax is imposed on this market,the effect of this tax on the price suppliers receive will be greatest when:​

Accepted Answer

A) ​d is small and b is large. 
B) ​d and b are both small. 
C) ​d and b are both large. 
D) ​d is large and b is small. 
A) ​d is small and b is large. 
B) ​d and b are both small. 
C) ​d and b are both large. 
D) ​d is large and b is small.

Question 9

For an increasing cost industry,the long-run supply curve has a(n)_____ elasticity of supply.

Accepted Answer

A) infinite 
B) negative 
C) positive 
D) zero 
A) infinite 
B) negative 
C) positive 
D) zero

Question 10

refer to a market in which quantity demanded is given by   and quantity supplied by  
-In this market,equilibrium price is given by:​

Accepted Answer

A) ​   
B) ​   
C) ​   
D) ​   
A) ​   
B) ​   
C) ​   
D) ​

Question 11

In the very short run:

Accepted Answer

A) new firms may enter an industry. 
B) existing firms may change the quantity they are supplying. 
C) price and quantity supplied are absolutely fixed. 
D) quantity supplied is absolutely fixed. 
A) new firms may enter an industry. 
B) existing firms may change the quantity they are supplying. 
C) price and quantity supplied are absolutely fixed. 
D) quantity supplied is absolutely fixed.

Question 12

If the market for hula-hoops is characterized by a very inelastic supply curve and a very elastic demand curve,an inward shift in the supply curve would be reflected primarily in the form of:

Accepted Answer

A) higher prices. 
B) higher output. 
C) lower prices. 
D) lower output. 
A) higher prices. 
B) higher output. 
C) lower prices. 
D) lower output.

Question 13

When prices drop in response to a decline in demand for an increasing cost industry:

Accepted Answer

A) producer surplus will increase but rents may decrease. 
B) rent earned by elastically supplied inputs will decline by more than rent earned by inelastically supplied inputs. 
C) rent earned by elastically supplied inputs will decline by less than rent earned by inelastically supplied inputs. 
D) both producer surplus and rents will increase. 
A) producer surplus will increase but rents may decrease. 
B) rent earned by elastically supplied inputs will decline by more than rent earned by inelastically supplied inputs. 
C) rent earned by elastically supplied inputs will decline by less than rent earned by inelastically supplied inputs. 
D) both producer surplus and rents will increase.

Question 14

refer to a market in which quantity demanded is given by   and quantity supplied by  
-In this market,an increase in the parameter c would:​

Accepted Answer

A) ​increase both price and quantity. 
B) ​increase price and decrease quantity. 
C) ​decrease both price and quantity. 
D) ​increase quantity and decrease price. 
A) ​increase both price and quantity. 
B) ​increase price and decrease quantity. 
C) ​decrease both price and quantity. 
D) ​increase quantity and decrease price.

Question 15

A market for a product for which demanders are willing to pay more than costs of production may not arise because of:

Accepted Answer

A) high transactions costs. 
B) strict price controls. 
C) the inability of producers to gain economies of scale. 
D) foreign countries dominating a domestic market for a product. 
A) high transactions costs. 
B) strict price controls. 
C) the inability of producers to gain economies of scale. 
D) foreign countries dominating a domestic market for a product.

Question 16

If the market for bottled spring water is characterized by a very elastic supply curve and a very inelastic demand curve,an outward shift in the supply curve would be reflected primarily in the form of:

Accepted Answer

A) higher prices. 
B) higher output. 
C) lower prices. 
D) lower output. 
A) higher prices. 
B) higher output. 
C) lower prices. 
D) lower output.

Question 17

Long-run elasticity of supply is defined as:

Accepted Answer

A) percentage change in quantity demanded in the long run divided by percentage change in price. 
B) percentage change in price divided by percentage change in quantity demanded in the long run. 
C) percentage change in quantity supplied in the long run divided by percentage change in price. 
D) percentage change in price divided by percentage change in quantity demanded in the long run 
A) percentage change in quantity demanded in the long run divided by percentage change in price. 
B) percentage change in price divided by percentage change in quantity demanded in the long run. 
C) percentage change in quantity supplied in the long run divided by percentage change in price. 
D) percentage change in price divided by percentage change in quantity demanded in the long run

Question 18

Under perfect competition,if an industry is characterized by positive economic profits in the short run:

Accepted Answer

A) firms will leave the market in the long run and the short-run supply curve will shift outward. 
B) firms will enter the market in the long run and the short-run supply curve will shift outward. 
C) firms will enter the market in the long run and the short-run supply curve will shift inward. 
D) firms will leave the market in the long run and the short-run supply curve will shift inward. 
A) firms will leave the market in the long run and the short-run supply curve will shift outward. 
B) firms will enter the market in the long run and the short-run supply curve will shift outward. 
C) firms will enter the market in the long run and the short-run supply curve will shift inward. 
D) firms will leave the market in the long run and the short-run supply curve will shift inward.

Question 19

The short-run market supply curve is:

Accepted Answer

A) the horizontal summation of each firm's short-run supply curve. 
B) the vertical summation of each firm's short-run supply curve. 
C) the horizontal summation of each firm's short-run average cost curve. 
D) the vertical summation of each firm's short-run average cost curve. 
A) the horizontal summation of each firm's short-run supply curve. 
B) the vertical summation of each firm's short-run supply curve. 
C) the horizontal summation of each firm's short-run average cost curve. 
D) the vertical summation of each firm's short-run average cost curve.

Question 20

The excess burden of a tax is:

Accepted Answer

A) the amount by which the price of a good increases. 
B) the loss of consumer and producer surplus that is not transferred to the government. 
C) the amount by which a person's after-tax income decreases as a result of the new tax. 
D) the welfare costs to firms forced to leave the market due to an inward shift of the demand curve. 
A) the amount by which the price of a good increases. 
B) the loss of consumer and producer surplus that is not transferred to the government. 
C) the amount by which a person's after-tax income decreases as a result of the new tax. 
D) the welfare costs to firms forced to leave the market due to an inward shift of the demand curve.

An increase in the price of an input to a perfectly competitive industry will:

In a competitive market,an efficient allocation of resources is characterized by:

One example of Ricardian rent is:

Firms in long-run equilibrium in a perfectly competitive industry will produce at the low points of their average total cost curves because:

One way to minimize the excess burden resulting from a specific tax is to:

A demand curve will shift out for any of the following reasons except that:

A deadweight loss of consumer and/or producer surplus occurs when:

refer to a market in which quantity demanded is given by and quantity supplied by -If a small unit tax is imposed on this market,the effect of this tax on the price suppliers receive will be greatest when:

For an increasing cost industry,the long-run supply curve has a(n)_____ elasticity of supply.

refer to a market in which quantity demanded is given by and quantity supplied by -In this market,equilibrium price is given by:

In the very short run:

If the market for hula-hoops is characterized by a very inelastic supply curve and a very elastic demand curve,an inward shift in the supply curve would be reflected primarily in the form of:

When prices drop in response to a decline in demand for an increasing cost industry:

refer to a market in which quantity demanded is given by and quantity supplied by -In this market,an increase in the parameter c would:

A market for a product for which demanders are willing to pay more than costs of production may not arise because of:

If the market for bottled spring water is characterized by a very elastic supply curve and a very inelastic demand curve,an outward shift in the supply curve would be reflected primarily in the form of:

Long-run elasticity of supply is defined as:

Under perfect competition,if an industry is characterized by positive economic profits in the short run:

The short-run market supply curve is:

The excess burden of a tax is:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 10: The Partial Equilibrium Competitive Model

An increase in the price of an input to a perfectly competitive industry will:​

In a competitive market,an efficient allocation of resources is characterized by:

One example of Ricardian rent is:

Firms in long-run equilibrium in a perfectly competitive industry will produce at the low points of their average total cost curves because:

One way to minimize the excess burden resulting from a specific tax is to:

A demand curve will shift out for any of the following reasons except that:

A deadweight loss of consumer and/or producer surplus occurs when:

refer to a market in which quantity demanded is given by and quantity supplied by -If a small unit tax is imposed on this market,the effect of this tax on the price suppliers receive will be greatest when:​

For an increasing cost industry,the long-run supply curve has a(n)_____ elasticity of supply.

refer to a market in which quantity demanded is given by and quantity supplied by -In this market,equilibrium price is given by:​

In the very short run:

If the market for hula-hoops is characterized by a very inelastic supply curve and a very elastic demand curve,an inward shift in the supply curve would be reflected primarily in the form of:

When prices drop in response to a decline in demand for an increasing cost industry:

refer to a market in which quantity demanded is given by and quantity supplied by -In this market,an increase in the parameter c would:​

A market for a product for which demanders are willing to pay more than costs of production may not arise because of:

If the market for bottled spring water is characterized by a very elastic supply curve and a very inelastic demand curve,an outward shift in the supply curve would be reflected primarily in the form of:

Long-run elasticity of supply is defined as:

Under perfect competition,if an industry is characterized by positive economic profits in the short run:

The short-run market supply curve is:

The excess burden of a tax is:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

An increase in the price of an input to a perfectly competitive industry will:

refer to a market in which quantity demanded is given by and quantity supplied by -If a small unit tax is imposed on this market,the effect of this tax on the price suppliers receive will be greatest when:

refer to a market in which quantity demanded is given by and quantity supplied by -In this market,equilibrium price is given by:

refer to a market in which quantity demanded is given by and quantity supplied by -In this market,an increase in the parameter c would: