devry econ 312 week 4 midterm

| August 14, 2017

(TCO 1) As a consequence of the condition of scarcity

there is never enough of anything.
production has to be centrally planned.
things which are plentiful have relatively
high prices.
individuals and communities have to make
choices from among alternatives.

Question 2. Question
:
(TCO 1) The opportunity cost of constructing a new public
highway is the

money cost of hiring contractors and
construction workers for the new highway.
value of other goods and services that must be
sacrificed to construct the new highway.
expected cost of constructing the new highway
in a future year.
value of shorter driving times and distances
when the new highway is completed.

Question 3. Question
:
(TCO 1) A nation can increase its production possibilities
by

shifting resources from investment good
production to consumer good production.
shifting resources from private goods to
public goods.
improving labor productivity.
eliminating discrimination.

:

Question 4. Question
:
(TCO 1) Which expression is another way of saying
“marginal benefit”?

Benefits given up
Unintended gain
Employment benefits
Extra benefit

Question 5. Question
:
(TCO 1) The individual who brings together economic
resources and assumes the risk of business ventures in a capitalist economy is
called the

manager.
entrepreneur.
stockbroker.
banker.

Question 6. Question
:
(TCO 1) The Soviet Union economy of the 1980s would best be
classified as

a market system.
pure capitalism.
laissez-faire capitalism.
a command system.

Question 7. Question
: The simple circular-flow model
shows that workers, entrepreneurs, and the owners of land and capital offer
their services through

product markets.
resource markets.
employment agencies.
business firms.

Question 8. Question
:
(TCO 1) Consumers express self-interest when they

seek the lowest price for a product.
reduce business losses.
collect economic profits.
search for jobs with the highest wages.

Question 9. Question
:
(TCO 1) Which is not one of the five fundamental questions
that an economy must deal with?

How will the goods and services be produced?
Why should the goods and services be produced?
Who is to receive the goods and services
produced in the economy?
In what ways will progress be promoted?

Question 10. Question
:
(TCO 1) The major “success indicator” for business
managers in command economies like the Soviet Union and China in the past was

the quantity of output.
product quality.
the amount of profits.
worker morale.

Question 11. Question
:
(TCO 2) An increase in demand means that

given supply, the price of the product will
decline.
the demand curve has shifted to the right.
price has declined and consumers therefore
want to purchase more of the product.
the demand curve has shifted to the left.

Question 12. Question
:
(TCO 2) At the point where the demand and supply curves
intersect

the buying and selling decisions of consumers
and producers are inconsistent with one another.
the market is in disequilibrium.
there is neither a surplus nor a shortage of
the product.
quantity demanded exceeds quantity supplied.

Question 13. Question
:
(TCO 2) Black markets are associated with

price floors and the resulting product
surpluses.
price floors and the resulting product
shortages.
price ceilings and the resulting product
shortages.
price ceilings and the resulting product
surpluses.

:

Question 14. Question
:
(TCO 2) An increase in demand for oil along with a
simultaneous increase in supply of oil will

decrease price and increase quantity.
increase price and decrease quantity.
increase quantity, but whether it increases
price depends on how much each curve shifts.
increase price, but whether it increases
quantity depends on how much each curve shifts.

Question 15. Question
:
(TCO 2) If Product Y is an inferior good, a decrease in
consumer incomes will

make buyers want to buy less of Product Y.
not affect the sales of Product Y.
shift the demand curve for Product Y to the
left.
shift the demand curve for Product Y to the
right.

Question 16. Question
:
(TCO 2) If the price elasticity of demand for a product is
equal to 0.5, then a 10 percent decrease in price will increase quantity
demanded by

20 percent.
0.5 percent.
5 percent.

Question 17. Question
:
(TCO 2) Total revenue falls as the price of a good is
raised, if the demand for the good is

elastic.
inelastic.
unitary elastic.
perfectly elastic.

Question 18. Question
:
(TCO 2) You are the sales manager for a software company and
have been informed that the price elasticity of demand for your most popular
software is less than 1. To increase
total revenues, you should:

increase the price of the software.
decrease the price of the software.
hold the price of the software constant.
increase the supply of the software.

Question 19. Question
:
(TCO 2) A state government wants to increase the taxes on
cigarettes to increase tax revenue. This
tax would only be effective in raising new tax revenues if the price elasticity
of demand is

unity.
elastic.
inelastic.
perfectly elastic.

Question 20. Question
:
(TCO 2) When universities announce a large tuition increase
and follow it with an announcement that more financial aid will be available,
they are assuming that students who pay full tuition

:
have elastic demand and students who use financial aid have inelastic demand.
have inelastic demand and students who use
financial aid have elastic demand.
view a college education as an inferior good
and students who use financial aid view it as a normal good.
view a college education as a normal good and
students who use financial aid view it as an inferior good.

Question 21. Question
:
(TCO 3) Suppose that you could prepare your own tax return
in 15 hours, or you could hire a tax specialist to prepare it for you in two
hours. You value your time at $11 an
hour. The tax specialist will charge you
$55 an hour. The opportunity cost of
preparing your own tax return is

$40.
$55.
$110.
$165.

Question 22. Question
:
(TCO 3) Economic profits are equal to

total revenues minus fixed costs.
total revenues minus the costs of raw
materials.
total revenues minus the opportunity costs of
all inputs.
gross profit minus selling and operating
expenses.

Question 23. Question
:
(TCO 3) The main difference between the short run and the
long run is that

firms earn zero profits in the long run.
the long run always refers to a time period of
one year or longer.
in the short run, some inputs are fixed.
in the long run, all inputs are fixed.

Question 24. Question
:
(TCO 3) The law of diminishing returns only applies in cases
where

there is increasing scarcity of factors of
production.
the price of extra units of a factor is
increasing.
there is at least one fixed factor of
production.
capital is a variable input.

Question 25. Question
:
(TCO 3) Marginal cost can be defined as the

change in total fixed cost resulting from one
more unit of production.
change in total variable cost resulting from
one more unit of production.
change in average total cost resulting from
one more unit of production.
change in average variable cost resulting from
one more unit of production.

Question 26. Question
:
(TCO 3) If the price of a fixed factor of production
increases by 50 percent, what effect would this have on the marginal-cost
schedule facing a firm?

None, because fixed costs do not affect
marginal cost.
Marginal cost would increase by 50 percent.
Marginal cost would increase by less than 50
percent.
Marginal cost would increase by more than 50
percent.

: (TCO 3) Mutual interdependence would tend to limit control over price in which market model?Monopolistic competitionPure competitionPure monopolyOligopolyQuestion 2. Question :(TCO 3) Under which market model are the conditions of entry into the market easiest?Pure competitionPure monopolyMonopolistic competitionOligopolyQuestion 3. Question :(TCO 3) The production of agricultural products such as wheat or corn would best be described by which market model?Monopolistic competitionPure competitionPure monopolyOligopolyQuestion 4. Question :(TCO 3) The demand curve faced by a purely competitive firm= has unitary elasticity.yields constant total revenues even when price changes.is identical to the market demand curve.is the same as its marginal revenue curve.Question 5. Question :(TCO 3) A profit-maximizing firm in the short run will expand outputuntil marginal cost begins to rise.until total revenue equals total cost.until marginal cost equals average variable cost.as long as marginal revenue is greater than marginal cost.Question 6. Question :(TCO 3) A firm should increase the quantity of output as long as itsmarginal revenue is greater than its marginal cost.marginal cost is greater than its marginal revenue.average revenue is greater than its average total cost.average revenue is greater than its average variable cost.Question 7. Question :(TCO 3) The short-run supply curve for a competitive firm is theentire MC curve.segment of the MC curve lying below the AVC curve.segment of the MC curve lying above the AVC curve.segment of the AVC curve lying to the right of the MC curve.Question 8. Question :(TCO 3) The classic example of a private, unregulated monopoly isXerox.De Beers.General Motors.General Electric.:Question 9. Question :(TCO 3) Barriers to entryusually result in pure competition.can result from government regulation.exist in economic theory but not in the real world.are typically the result of wrongdoing on the part of a firm.Question 10. Question :(TCO 3) The demand curve confronting a nondiscriminating, pure monopolist is: horizontal.the same as the industry’s demand curve.more elastic than the demand curve confronting a competitive firm.derived by vertically summing the individual demand curves for the buyers.:Question 11. Question :(TCO 3) Which is the best example of price discrimination?An airline company charging lower fares per pound for air freight than for passengers.A telephone company charging lower rates to weekend users than weekday users.A supermarket charging lower prices in its inner city store than its out-of-town store.A private doctor charging higher fees to patients receiving special services than patients receiving regular services.Question 12. Question :(TCO 3) In which industry is monopolistic competition most likely to be found?UtilitiesAgricultureRetail tradeMiningQuestion 13. Question :(TCO 3) Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation willreduce the excess capacity in the industry as firms expand production.attract other firms to enter the industry, causing the firm’s profits to shrink.cause firms to standardize their product to limit the degree of competition.make the industry allocatively efficient as each firm seeks to maintain its profits.Question 14. Question :(TCO 3) A unique feature of an oligopolistic industry islow barriers to entry.standardized products.diminishing marginal returns.mutual interdependence.Question 15. Question :(TCO 3) A low concentration ratio means thatthere is a low probability of entering the industry.there is a low probability of success in the industry.each firm accounts for a small market share of the industry.each firm accounts for a large market share of the industry.Question 16. Question :(TCO 3) In which set of market models are there the most significant barriers to entry?/: Monopolistic competition and pure competitionMonopolistic competition and pure monopolyOligopoly and monopolistic competitionOligopoly and pure monopolyQuestion 17. Question :(TCO 1) The four factors of production areland, labor, capital, and money.land, labor, capital, and entrepreneurial ability.labor, capital, technology, and entrepreneurial ability.labor, capital, entrepreneurial ability, and money.Question 18. Question :(TCO 1) Refer to the diagram below which is based on the Circular Flow Model in Chapter 2. Arrows (1) and (2) representdiagram1Graph Descriptiongoods and resources, respectively.money incomes and output, respectively.output and money incomes, respectively.resources and goods, respectively.Question 19. Question :(TCO 2) Refer to the diagram. An increase in quantity demanded is depicted by adiagram2Graph Descriptionmove from Point x to Point y.shift from D1 to D2.shift from D2 to D1.move from Point y to Point x.Question 20. Question :(TCO 2) Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the gamePrice per TicketQuantity Demanded$131,000112,00093,00074,00055,00036,000varies inversely with ticket prices.varies directly with ticket prices.is perfectly inelastic.is perfectly elastic.Question 21. Question :(TCO 2) Which type of goods is most adversely affected by recessions?: Goods for which the income-elasticity coefficient is relatively low or negative.Goods for which the income-elasticity coefficient is relatively high and positive.Goods for which the cross-elasticity coefficient is positive.Goods for which the cross-elasticity coefficient is negative.Question 22. Question :(TCO 3) The following cost data are for a firm in the short run:Output Total Cost0 $4001 5002 5503 6004 6505 700What is the firm’s average variable cost at an output of 5 units?Student Answer: $30$60$120$140Question 23. Question :(TCO 1) Refer to the diagram. Points A, B, C, D, and E showpoints diagram1Graph Descriptionthat the opportunity cost of bicycles increases, while that of computers is constant.combinations of bicycles and computers that society can produce by using its resources efficiently.that the opportunity cost of computers increases, while that of bicycles is constant.that society’s demand for computers is greater than its demand for bicycles.Question 24. Question :(TCO 3) Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures asrent-seeking.price discrimination.X-efficiency.network effects.Question 25. Question :(TCO 3) a.) A pure monopolist determines that at the current level of output the marginal cost of production is $2, average variable costs are $2.75, and average total costs are $2.95. The marginal revenue is $2.75. What would you recommend that the monopolist do to maximize profits? b.) Why might a business owner keep their business open but let it deteriorate, rather than shut it down? Will this profitability last?Student Answer:Question 26. Question :(TCO 2) Evaluate how the following situations will affect the demand curve for iPods.(a) Income statistics show that income of 18–25-year-olds have increased by 10 percent over the last year.(b) Efforts of music artists wanting greater protection of their music result in more stringent enforcement of copyrights and the shutdown of numerous illegal downloading sites.(c) Believing that it has significant control of the market for portable digital music players, Apple decides to raise the price of iPods with the goal of increasing profits.(d) The price of milk decreases.

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