Econ Final

43 Questions  I  By Abbeytraylor
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Economics Quizzes & Trivia

  
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  • 1. 
    When firms have the ability to restrict output, raise prices, stifle competition, and inhibit innovation the market failure involved is: 
    • A. 

      Public goods.

    • B. 

      Externalities.

    • C. 

      Market power.

    • D. 

      Inequities.


  • 2. 
    Market failure: 
    • A. 

      Occurs whenever the government intervenes in the market mechanism.

    • B. 

      Occurs whenever the government pursues laissez-faire policies

    • C. 

      Occurs whenever an imperfection in the market mechanism prevents optimal outcomes.

    • D. 

      Never occurs.


  • 3. 
    Which of the following is a form of government intervention? 
    • A. 

      Natural monopoly

    • B. 

      Public Goods

    • C. 

      Regulation

    • D. 

      Externalities


  • 4. 
    The goal of antitrust laws is to: 
    • A. 

      Control the structure of an industry only

    • B. 

      Alter industry behavior only.

    • C. 

      Prevent monopolies from forming.

    • D. 

      Control the structure of an industry and alter industry behavior


  • 5. 
    All of the following are examples of natural monopolies except: 
    • A. 

      Local telephone companies.

    • B. 

      Electricity companies.

    • C. 

      College bookstores.

    • D. 

      Railroad companies.


  • 6. 
    If a natural monopoly was broken into several smaller competing firms: 
    • A. 

      Consumers would lose because of less competition.

    • B. 

      Producers would be better off because they would have greater market share.

    • C. 

      Society would be worse off because the economies of scale would be destroyed.

    • D. 

      Workers would be worse off because fewer jobs would be available.


  • 7. 
    If a natural monopoly was forced to break up into several small competitive firms, then the: 
    • A. 

      Cost of production should fall as the smaller firms become more efficient.

    • B. 

      Price charged by the competitive firms should decrease as the firms become more efficient.

    • C. 

      Price charged by the competitive firms should increase because the firms will be less efficient.

    • D. 

      . Total production for the industry should increase because of the efficiency generated by increased competition.


  • 8. 
    According to the text, what type of market failure provides the best case for government regulation? 
    • A. 

      Market power

    • B. 

      Public goods

    • C. 

      Inequalities

    • D. 

      Natural monopoly


  • 9. 
    If a natural monopoly is forced to use marginal cost pricing, which of the following is not true? 
    • A. 

      Average total costs increase

    • B. 

      Output increases

    • C. 

      Allocative efficiency is achieved

    • D. 

      Economic profits are reduced


  • 10. 
    Which of the following is not a regulatory option when the government is trying to prevent market failure in the case of a natural monopoly? 
    • A. 

      Cost Regulation

    • B. 

      Profit Regulation

    • C. 

      Output Regulation

    • D. 

      Price Regulation


  • 11. 
    If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination, the monopolist would: 
    • A. 

      Lose money and go out of business.

    • B. 

      Earn only normal profits.

    • C. 

      Earn economic profits.

    • D. 

      Earn less of a profit than before, but still earn a profit.


  • 12. 
    A major drawback of providing subsidies to private companies that are natural monopolies is that: 
    • A. 

      Taxpayers dislike this use of their tax dollars.

    • B. 

      Private companies are less efficient than public companies.

    • C. 

      The companies have no incentive to limit costs.

    • D. 

      The companies will allow product quality to decline.


  • 13. 
    Output regulation forces the natural monopolist to produce at an output: 
    • A. 

      That perfectly competitive firms would choose.

    • B. 

      Where MR = MC.

    • C. 

      Greater than its profit-maximizing choice.

    • D. 

      Where MR equals zero.


  • 14. 
    When market outcomes improve after government regulation is enforced: 
    • A. 

      Technical efficiency is achieved.

    • B. 

      The net effect of government intervention on society is definitely beneficial.

    • C. 

      Government intervention still may not be justified if the economic costs are too high.

    • D. 

      Allocative efficiency is achieved.


  • 15. 
    Government failure occurs when: 
    • A. 

      Dealing with a natural monopoly.

    • B. 

      There is market power.

    • C. 

      Government intervention fails to improve economic outcomes.

    • D. 

      Public goods are present.


  • 16. 
    Braden and Brendon considered starting a new skydiving company. Once they read the government regulations they would have to comply with, they changed their minds. This is an example of: 
    • A. 

      An administrative cost of regulation.

    • B. 

      An efficiency cost of regulation.

    • C. 

      A compliance cost of regulation.

    • D. 

      An equity cost of regulation.


  • 17. 
    When the regulatory process itself becomes a drag on economic growth, society experiences: 
    • A. 

      Compliance costs of regulation.

    • B. 

      Administrative costs of regulation.

    • C. 

      Budgetary costs of regulation.

    • D. 

      Efficiency costs of regulation.


  • 18. 
    In cost-benefit analysis, regulatory intervention can be justified if the: 
    • A. 

      Marginal benefit of regulation exceeds its marginal cost.

    • B. 

      Economic cost of regulation exceeds the value of the improvements in government intervention.

    • C. 

      Value of government failure exceeds the value of market failure.

    • D. 

      Intervention improves market outcomes, regardless of costs.


  • 19. 
    Which of the following markets has not been subject to substantial deregulation? 
    • A. 

      Airlines

    • B. 

      Computers

    • C. 

      Telecommunications

    • D. 

      Cable TV


  • 20. 
    In the real world, the choice is between: 
    • A. 

      Perfect markets and perfect government intervention.

    • B. 

      Perfect markets and imperfect government intervention.

    • C. 

      Imperfect markets and perfect government intervention.

    • D. 

      Imperfect markets and imperfect government intervention.


  • 21. 
    As an individual earns additional income, the marginal utility of income tends to: 
    • A. 

      Increase

    • B. 

      Decrease

    • C. 

      Remain Constant

    • D. 

      Shift toward the origin


  • 22. 
    Campbell loves to work. He does not receive any enjoyment from leisure time. The last dollar that he earns each year means just as much to him as the first dollar. Which of the following best describes the shape of Campbell's labor supply curve? 
    • A. 

      Upward sloping to the right

    • B. 

      Vertical

    • C. 

      Downward sloping to the right

    • D. 

      Horizontal


  • 23. 
    Workers typically require higher wages in order to work additional hours because of the: 
    • A. 

      Increasing opportunity cost of labor.

    • B. 

      Increasing marginal utility of income.

    • C. 

      Decreasing value of leisure time forgone.

    • D. 

      Constant marginal utility of income.


  • 24. 
    The substitution effect of wages states that a decreased wage rate: 
    • A. 

      Encourages people to consume less leisure.

    • B. 

      Will shift the labor supply curve rightward.

    • C. 

      Will lead to a movement up along the existing supply curve.

    • D. 

      Encourages people to work less hours.


  • 25. 
    Higher wage rates allow a person to reduce the hours worked without losing income. This is known as the: 
    • A. 

      Substitution effect.

    • B. 

      Income effect.

    • C. 

      Law of diminishing marginal utility.

    • D. 

      Law of diminishing marginal leisure.


  • 26. 
    Kip will work less hours if his salary increases. For Kip, the ___________ effect must outweigh the __________ effect. 
    • A. 

      Substitution; income

    • B. 

      Income; substitution

    • C. 

      Income; utility

    • D. 

      Utility; substitution


  • 27. 
    The determinants of the market supply of labor include all of the following except: 
    • A. 

      Taxes.

    • B. 

      Market Wage Rate.

    • C. 

      Income & Wealth.

    • D. 

      Prices of Consumer Goods


  • 28. 
    The elasticity of labor supply does not depend on: 
    • A. 

      The demand for labor.

    • B. 

      The prices of consumer goods.

    • C. 

      Income and wealth.

    • D. 

      Expectations for income or consumption.


  • 29. 
    The demand for labor and other factors of production typically declines in a recession because those factors: 
    • A. 

      Have become relatively more scarce than before the recession.

    • B. 

      Are no longer offered for sale in factor markets.

    • C. 

      Are derived from the demand for final output, which also declines in a recession.

    • D. 

      Have become more expensive than before the recession.


  • 30. 
    Students who major in computer science are paid a lot more when they graduate than those who major in philosophy because the: 
    • A. 

      Derived demand for computer science majors is less than the derived demand for philosophy majors.

    • B. 

      Marginal revenue product for computer science majors is less than the marginal revenue product for philosophy majors.

    • C. 

      The search for the meaning of life is a growth industry.

    • D. 

      Information technology is a growth industry.


  • 31. 
    When the MPP of labor is zero, ceteris paribus: 
    • A. 

      Employment can be increased only by offering a higher wage rate.

    • B. 

      No further increases in output can be achieved by using additional units of labor.

    • C. 

      MRP is at maximum.

    • D. 

      Additional units of labor must be employed because other factors of production are being wasted.


  • 32. 
    The marginal revenue product of labor is equal to: 
    • A. 

      The marginal physical product multiplied by the marginal revenue of the output.

    • B. 

      The change in the quantity of labor divided by the change in total revenue.

    • C. 

      The change in total output divided by the change in the quantity of labor.

    • D. 

      The percentage change in total revenue divided by the percentage change in the quantity of labor.


  • 33. 
    Marginal physical product diminishes as additional workers are hired because: 
    • A. 

      Each worker has an increasingly smaller amount of other factors with which to work.

    • B. 

      Each worker has an increasingly larger amount of other factors with which to work.

    • C. 

      Later hires are not as skilled as earlier hires.

    • D. 

      Later hires do not work as hard as earlier hires.


  • 34. 
    As marginal physical product diminishes, marginal revenue product: 
    • A. 

      Also diminishes.

    • B. 

      Is not effected.

    • C. 

      Rises.

    • D. 

      Rises at a diminishing rate and falls.


  • 35. 
    A competitive firm should continue to hire workers until the MRP is equal to: 
    • A. 

      Demand.

    • B. 

      The number of workers hired.

    • C. 

      The market wage rate.

    • D. 

      Zero.


  • 36. 
    As labor productivity increases, which of the following shifts in the labor market should occur? 
    • A. 

      Supply of labor should shift to the left

    • B. 

      Demand for labor should shift to the left

    • C. 

      Supply of labor should shift to the right

    • D. 

      Demand for labor should shift to the right


  • 37. 
    Other things being equal, which of the following would increase the market demand for labor? 
    • A. 

      A fall in the wage rate

    • B. 

      An increase in the marginal productivity of labor

    • C. 

      A decrease in the cost effectiveness of labor relative to other inputs

    • D. 

      A decrease in the market demand for the firm's output


  • 38. 
    If the demand for hair gel increases, the effect on the hair gel manufacturing job market will be to: 
    • A. 

      Increase the demand for labor and increase equilibrium wages.

    • B. 

      Reduce the supply of labor and increase equilibrium wages.

    • C. 

      Decrease the demand for labor and reduce equilibrium wages.

    • D. 

      Have no impact on equilibrium wages.


  • 39. 
    When there are more qualified applicants than job openings, this indicates that the: 
    • A. 

      Economy must be in a recession.

    • B. 

      Labor supply curve must be backward bending.

    • C. 

      Wages being offered are too high.

    • D. 

      Available jobs must be very desirable and pay high wages.


  • 40. 
    Republicans argue that labor demand is ________, so ________ jobs will be lost when the minimum wage is raised: 
    • A. 

      Inelastic; few

    • B. 

      Inelastic; many

    • C. 

      Elastic; few

    • D. 

      Elastic; many


  • 41. 
    The proportion of total income received by a particular group is called the groups: 
    • A. 

      Market share.

    • B. 

      Income share.

    • C. 

      Gini coefficient.

    • D. 

      Functional distribution of income


  • 42. 
    If the area between the diagonal line of absolute equality and the Lorenz curve is greater for the United States than for Japan, we can conclude that the: 
    • A. 

      Distribution of income in Japan is closer to being equal than in the United States.

    • B. 

      Distribution of income in Japan is as equal as in the United States.

    • C. 

      Distribution of income in Japan is less equal than in the United States.

    • D. 

      Relative distribution of income between the two countries is the same.


  • 43. 
    If the percentage of income paid in taxes increases as income rises, then the tax system is: 
    • A. 

      Regressive

    • B. 

      Progressive

    • C. 

      Marginal

    • D. 

      Nominal


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