Question 1

For entry into a particular perfectly competitive industry to occur,which of the following must be true?

Accepted Answer

A)  Accounting profits are equal to zero 
B)  Accounting profits equal economic profits 
C)  Economic profits are greater than zero 
D)  Economic profits are equal to zero 
A)  Accounting profits are equal to zero 
B)  Accounting profits equal economic profits 
C)  Economic profits are greater than zero 
D)  Economic profits are equal to zero

Question 2

Daily Supply and Demand: Oranges in Hurricane Alley  
Refer to the figure above.At the price of $4.00,sellers offer _____ pounds of oranges per day,and buyers want to purchase ____ pounds of oranges a day.

Accepted Answer

A)  10;30 
B)  10;20 
C)  20;20 
D)  30;10 
A)  10;30 
B)  10;20 
C)  20;20 
D)  30;10

Question 3

Factors of production most likely to earn positive economic rent are:

Accepted Answer

A)  real estate. 
B)  uniquely talented individuals. 
C)  fixed factors. 
D)  factors that are subject to free entry. 
A)  real estate. 
B)  uniquely talented individuals. 
C)  fixed factors. 
D)  factors that are subject to free entry.

Question 4

The argument that efficiency is an appropriate goal assumes that the gains from enhancing efficiency:

Accepted Answer

A)  will be equally distributed in the population. 
B)  will benefit the poor by more than the wealthy. 
C)  could potentially benefit everyone. 
D)  reduce income disparities in the population. 
A)  will be equally distributed in the population. 
B)  will benefit the poor by more than the wealthy. 
C)  could potentially benefit everyone. 
D)  reduce income disparities in the population.

Question 5

Chris was the business manager for a real estate firm earning an annual salary of $40,000.Then Chris decided to become a consultant.Chris hired an administrative assistant at $15,000 per year and rents office space (utilities included)for $3,000 per month.Chris earned $100,000 in total revenue the first year as a consultant.
In order for Chris to earn normal profit,accounting profit would have to be _______.

Accepted Answer

A)  $51,000 
B)  $40,000 
C)  0 
D)  $9,000 
A)  $51,000 
B)  $40,000 
C)  0 
D)  $9,000

Question 6

Superstar professional athletes can sustain their economic rents because:

Accepted Answer

A)  team owners will pay anything to win the championship. 
B)  they have excellent union representation. 
C)  their opportunity costs of playing are high. 
D)  if their current team does not pay,they can take their unique talents to another team willing to pay. 
A)  team owners will pay anything to win the championship. 
B)  they have excellent union representation. 
C)  their opportunity costs of playing are high. 
D)  if their current team does not pay,they can take their unique talents to another team willing to pay.

Question 7

The allocative function of price works well under conditions of:

Accepted Answer

A)  free entry and difficult exit. 
B)  free entry and free exit. 
C)  free entry only. 
D)  free exit only. 
A)  free entry and difficult exit. 
B)  free entry and free exit. 
C)  free entry only. 
D)  free exit only.

Question 8

Which of the following describes a surplus-enhancing transaction?

Accepted Answer

A)  The Federal government taxes wealthy individuals to pay for income support payments to poor people. 
B)  The public television station cancels Sesame Street because nobody pledged during that show even though many kids were watching it. 
C)  I pay $5.00 for one scoop of ice cream at the ballgame even though I have a whole gallon at home in my freezer that cost me less than $5.00. 
D)  Your state government imposes a higher minimum wage law than the one set by federal law. 
A)  The Federal government taxes wealthy individuals to pay for income support payments to poor people. 
B)  The public television station cancels Sesame Street because nobody pledged during that show even though many kids were watching it. 
C)  I pay $5.00 for one scoop of ice cream at the ballgame even though I have a whole gallon at home in my freezer that cost me less than $5.00. 
D)  Your state government imposes a higher minimum wage law than the one set by federal law.

Question 9

Chris was the business manager for a real estate firm earning an annual salary of $40,000.Then Chris decided to become a consultant.Chris hired an administrative assistant at $15,000 per year and rents office space (utilities included)for $3,000 per month.Chris earned $100,000 in total revenue the first year as a consultant.
Chris's accounting profit is _______ and Chris's economic profit is _______.

Accepted Answer

A)  $100,000;$64,000 
B)  $64,000;$49,000 
C)  $49,000;$9,000 
D)  $9,000;0 
A)  $100,000;$64,000 
B)  $64,000;$49,000 
C)  $49,000;$9,000 
D)  $9,000;0

Question 10

If buyers and sellers are free to pursue their own selfish interests,according to the invisible hand theory,the result would be:

Accepted Answer

A)  anarchy. 
B)  exploitation of workers and natural resources. 
C)  an equitable allocation of resources. 
D)  an efficient allocation of resources. 
A)  anarchy. 
B)  exploitation of workers and natural resources. 
C)  an equitable allocation of resources. 
D)  an efficient allocation of resources.

Question 11

Mary Jane is willing to baby-sit for $6 an hour.Her neighbor called and asked her to baby-sit for $8 an hour.Mary Jane will earn:

Accepted Answer

A)  consumer surplus of $2 per hour. 
B)  economic rent of $2 per hour. 
C)  economic profit of $8 per hour. 
D)  accounting profit of $8 per hour,but economic profit of $0 per hour. 
A)  consumer surplus of $2 per hour. 
B)  economic rent of $2 per hour. 
C)  economic profit of $8 per hour. 
D)  accounting profit of $8 per hour,but economic profit of $0 per hour.

Question 12

Suppose all firms in a perfectly competitive industry are experiencing economic profits.One would expect that,over time,the number of firms will _______ and the market price will _____.

Accepted Answer

A)  rise;fall 
B)  fall;rise 
C)  rise;rise 
D)  rise;stay the same 
A)  rise;fall 
B)  fall;rise 
C)  rise;rise 
D)  rise;stay the same

Question 13

Price ceilings above the equilibrium price result in:

Accepted Answer

A)  market prices above the equilibrium price. 
B)  a market unable to reach Pareto Efficiency. 
C)  a market that is able to reach Pareto Efficiency. 
D)  wealth redistribution to benefit the poor. 
A)  market prices above the equilibrium price. 
B)  a market unable to reach Pareto Efficiency. 
C)  a market that is able to reach Pareto Efficiency. 
D)  wealth redistribution to benefit the poor.

Question 14

Last year Pat was a soybean farmer and Chris was a corn farmer.This year,high demand for ethanol,an automobile fuel made from corn,causes the price of corn to increase.
Refer to the information above.Relative to last year,the price of soybeans is likely to be ______,and the price of corn is likely to be ______.

Accepted Answer

A)  higher;higher 
B)  higher;lower 
C)  lower,higher 
D)  the same;higher 
A)  higher;higher 
B)  higher;lower 
C)  lower,higher 
D)  the same;higher

Question 15

When either the costs of production or the benefits of consumption to individuals differ from those of society:

Accepted Answer

A)  the equilibrium output will be the socially optimal output. 
B)  the equilibrium is not efficient. 
C)  the allocation of resources remains correct. 
D)  the invisible hand had completely failed. 
A)  the equilibrium output will be the socially optimal output. 
B)  the equilibrium is not efficient. 
C)  the allocation of resources remains correct. 
D)  the invisible hand had completely failed.

For entry into a particular perfectly competitive industry to occur,which of the following must be true?

Daily Supply and Demand: Oranges in Hurricane Alley Refer to the figure above.At the price of $4.00,sellers offer _ pounds of oranges per day,and buyers want to purchase pounds of oranges a day.

Factors of production most likely to earn positive economic rent are:

The argument that efficiency is an appropriate goal assumes that the gains from enhancing efficiency:

Superstar professional athletes can sustain their economic rents because:

The allocative function of price works well under conditions of:

Which of the following describes a surplus-enhancing transaction?

If buyers and sellers are free to pursue their own selfish interests,according to the invisible hand theory,the result would be:

Mary Jane is willing to baby-sit for $6 an hour.Her neighbor called and asked her to baby-sit for $8 an hour.Mary Jane will earn:

Suppose all firms in a perfectly competitive industry are experiencing economic profits.One would expect that,over time,the number of firms will ___ and the market price will _.

Price ceilings above the equilibrium price result in:

Last year Pat was a soybean farmer and Chris was a corn farmer.This year,high demand for ethanol,an automobile fuel made from corn,causes the price of corn to increase. Refer to the information above.Relative to last year,the price of soybeans is likely to be ,and the price of corn is likely to be .

When either the costs of production or the benefits of consumption to individuals differ from those of society:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Exam 7: Efficiency, Exchange, and the Invisible Hand in Action

For entry into a particular perfectly competitive industry to occur,which of the following must be true?

Daily Supply and Demand: Oranges in Hurricane Alley Refer to the figure above.At the price of $4.00,sellers offer _____ pounds of oranges per day,and buyers want to purchase ____ pounds of oranges a day.

Factors of production most likely to earn positive economic rent are:

The argument that efficiency is an appropriate goal assumes that the gains from enhancing efficiency:

Superstar professional athletes can sustain their economic rents because:

The allocative function of price works well under conditions of:

Which of the following describes a surplus-enhancing transaction?

If buyers and sellers are free to pursue their own selfish interests,according to the invisible hand theory,the result would be:

Mary Jane is willing to baby-sit for $6 an hour.Her neighbor called and asked her to baby-sit for $8 an hour.Mary Jane will earn:

Suppose all firms in a perfectly competitive industry are experiencing economic profits.One would expect that,over time,the number of firms will _______ and the market price will _____.

Price ceilings above the equilibrium price result in:

When either the costs of production or the benefits of consumption to individuals differ from those of society:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Daily Supply and Demand: Oranges in Hurricane Alley Refer to the figure above.At the price of $4.00,sellers offer _ pounds of oranges per day,and buyers want to purchase pounds of oranges a day.

Suppose all firms in a perfectly competitive industry are experiencing economic profits.One would expect that,over time,the number of firms will ___ and the market price will _.