Name: ________________________ Class: ___________________ Date: __________ ID: A

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2013 CH 9 17 18 sample questions - 200

Multiple ChoiceIdentify the choice that best completes the statement or answers the question.

____ 1. When studying pollution and the environment, economistsa. have no role to play.b. concentrate on the physical aspects of the environment.c. emphasize costs and benefits.d. attempt to reduce pollution at all costs.e. think pollution is good if it occurs when production takes place.

____ 2. The cost of producing an additional unit of a good or service is defined as thea. external cost.b. private cost.c. marginal cost.d. marginal external benefit.e. None of the above answers is correct.

____ 3. The cost of producing an additional unit of a good or service that is borne by the producer of that good or service is the marginala. external cost.b. private cost.c. social cost.d. public cost.e. None of the above answers is correct.

____ 4. For a product with an external cost, the supply curvea. represents the various quantities people can buy.b. is the same as the marginal private cost curve.c. is the same as the marginal social cost curve.d. is the same as the marginal external cost curve.e. is undefined.

____ 5. The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginala. external cost.b. private cost.c. social cost.d. social benefit.e. None of the above answers is correct.

____ 6. A firm dumps dioxin in a river, thereby severely polluting the river. The cost of the water pollution isi. zero for the firm.ii. an external cost.iii. part of the marginal social cost

a. i only.b. ii only.c. iii only.d. ii and iii.e. i, ii, and iii.

Name: ________________________ ID: A

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____ 7. Suppose two neighborhoods with 10 homes each in Buffalo, New York are identical except one of them is near a toxic waste dump. If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000, the external cost of the dump isa. $400,000.b. $1,300,000.c. $900,000.d. $500,000.e. $90,000.

____ 8. The marginal social cost, MSC, of producing a good or service equalsa. MC + MB.b. MB + marginal external cost.c. MB + marginal external benefit.d. MC + marginal external cost.e. MC + marginal external cost - marginal external benefit.

____ 9. The marginal cost incurred by the entire society to produce a good or service is the marginala. external cost.b. private cost.c. social cost.d. social benefit.e. private benefit.

____ 10. The marginal social cost of producing a good or service is thea. cost of producing an additional unit borne by the producer.b. cost of producing an additional unit borne by people other than the producer.c. sum of the marginal private cost and the marginal external cost.d. same as marginal external cost.e. sum of the marginal private cost and the marginal external cost minus the marginal social

benefit.____ 11. If a good has an external cost, then the marginal private cost curve

a. lies below then the marginal social cost curve.b. lies above the marginal social cost curve.c. lies below the horizontal axis.d. is the same as the marginal external cost curve.e. is undefined because the firms' costs are not equal to the social costs.

____ 12. The marginal external cost and marginal private costa. are all borne by the seller.b. are opportunity costs.c. when added, equal the sum of the marginal private benefit plus the marginal social

benefit at equilibrium.d. are regulated by the government.e. must always be equal in equilibrium.

____ 13. If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500, then thea. marginal benefit of a ton of cement will equal $4,000.b. total cost of producing a ton of cement is $7,500.c. marginal external cost of producing a ton of cement is $500.d. marginal external cost of producing a ton of cement is $7,500.e. marginal external cost of producing a ton of cement is $4,000.

Name: ________________________ ID: A

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____ 14. If the production of a good causes an external cost, then the efficient quantity isa. the quantity at which the marginal benefit equals marginal cost.b. less than the quantity at which the marginal benefit equals the marginal cost.c. more than the quantity at which the marginal benefit equals the marginal cost.d. the quantity at which the marginal private benefit is greater than the marginal social

benefit.e. None of the above answers is correct.

____ 15. If a good has an external cost, thea. competitive market outcome is efficient.b. marginal private cost reflects the external cost.c. competitive market outcome is inefficient.d. marginal social benefit is equal to the marginal social cost when the market is in

equilibrium.e. external benefit must equal the external cost.

____ 16. If producing a good or a service by an unregulated competitive industry creates pollution, thena. the market produces an efficient output.b. the industry's supply curve includes the extra cost of pollution.c. marginal social benefit equals the equilibrium price but marginal social cost is greater

than the equilibrium price.d. marginal social benefit and marginal social cost are equal at the equilibrium quantity.e. marginal social cost equals the equilibrium price but marginal social benefit is less than

the equilibrium price.

____ 17. The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered. Suppose the marginal private cost of the 5th concert is $10,000. Then, for the 5th concert, the marginala. external cost equals $30,000.b. social cost equals $30,000.c. external cost equals the marginal private cost.d. external cost equals $40,000.e. external cost equals $10,000.

Name: ________________________ ID: A

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____ 18. The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered. At 10 concerts, the marginala. private cost equals the marginal external cost.b. social cost equals $60,000.c. private cost is more than $40,000.d. external cost equals $60,000.e. external cost equals $80,000.

____ 19. The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered. It also illustrates the marginal private benefit. There is no external benefit. The efficient number of concerts in Seattle isa. 0.b. 5.c. 10.d. 20.e. 15.

____ 20. Legally established titles to ownership, use, and disposal of factors of production and goods and services, are called ____ rights.a. governmentb. pollutionc. propertyd. inefficiente. private

____ 21. Legally established titles to the ownership, use, and disposal of factors of production are referred to asa. property rights.b. Coase rights.c. pollution rights.d. emission rights.e. price-setting rights.

Name: ________________________ ID: A

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____ 22. One reason why property rights help achieve an efficient level of pollution is because property rightsa. force the marginal private cost to equal the marginal social cost.b. force the marginal social cost to zero.c. force the marginal external cost to a lower level than marginal private cost.d. eliminate marginal private costs.e. change the marginal external cost so that they are equal to the marginal social benefit.

____ 23. When transactions costs are low and the problem of external costs is resolved through private negations, the theorem that applies is known as thea. property rights theorem.b. emission rights theorem.c. pollution rights theorem.d. Coase theorem.e. private-market efficient theorem.

____ 24. The Coase theorem deals with the problem of pollution bya. giving the government regulatory power over polluters.b. making all polluters stop polluting.c. establishing and enforcing private property rights.d. having the government take over ownership of all polluting processes.e. allowing the government to set the proper emission charge.

____ 25. Transactions costs are thea. costs of using the Coase theorem.b. opportunity costs of conducting a transaction.c. external marginal costs of the externality.d. reason why taxes cannot alter the inefficiency resulting from an external cost.e. external costs when a firm pollutes.

____ 26. Which of the following is the best example of a transactions cost?a. the time spent shopping for a bathing suit.b. the price of a new set of tiresc. the cost associated with producing a golf clubd. the price of labor and materials used to produce a housee. the price of food

____ 27. Three methods the government can use to cope with external costs area. taxes, subsidies, and outright bans.b. taxes, regulations, and subsidies.c. marketable permits, subsidies, and taxes.d. emission charges, marketable permits, and taxes.e. vouchers, subsidies, and taxes.

Name: ________________________ ID: A

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____ 28. Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. In the absence of any government regulation, how many tons of leather will be produced?a. 0 tonsb. 200 tonsc. 300 tonsd. more than 300 tonse. None of the above answers is correct.

____ 29. In order to make emission charges effective, the regulator must determine the marginal external cost of pollution at different levels of output and levy a charge on polluters thata. is greater than that cost.b. is less than that cost.c. is equal to that cost.d. eliminates pollution.e. None of the above answers is correct.

____ 30. The government can aid in reducing pollution by using marketable permits, which means thata. polluters are taxed on the amount of pollution they discharge.b. emission charges are established by the EPA.c. each polluter is assigned a pollution limit and is given tradable permits that allow this

amount of pollution.d. only some producers pollute and the others go out of business.e. each polluter is assigned the property right to its pollution.

____ 31. Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution. If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, thena. Firm B sells its permits to Firm A for a price above $6,000.b. Firm A sells its permits to Firm B for a price below $6,000.c. Firm A sells its permits to Firm B for a price above $6,000.d. Firm B sells its permits to Firm A for a price below $6,000.e. neither Firm A nor Firm B sell permits because neither have extra permits.

Name: ________________________ ID: A

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____ 32. In order for taxes to be effective in eliminating the deadweight loss resulting from pollution, the tax must be set equal to thea. marginal private cost.b. marginal external cost.c. marginal social cost.d. marginal benefit of polluting.e. price of the good.

____ 33. To eliminate the inefficiency resulting from an external cost, the government can impose a tax on producers that is equal to thea. MSB.b. MC.c. marginal external cost.d. MSC.e. price.

____ 34. The figure above illustrates the gasoline market. There is no external benefit from gasoline. If a tax on gasoline is imposed as shown in the figure, then the quantity of gasoline produced and consumed equalsa. 0 gallons.b. 5 million gallons.c. 10 million gallons.d. 20 million gallons.e. None of the above answers is correct.

____ 35. The figure above illustrates the gasoline market. There is no external benefit from gasoline. If a tax on gasoline is imposed as shown in the figure, then the total tax revenue earned by the government equalsa. $24 million.b. $16 million.c. $8 million.d. more than $24 million.e. less than $8 million.

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____ 36. The figure above shows the market for the chemical hydrogen sulfide, the production of which creates an external cost. If the government assesses the marginal external cost correctly, what is the amount of the tax that eliminates the inefficiency?a. $2 per poundb. $3 per poundc. $4 per poundd. $1 per pound.e. None of the above answers is correct.

____ 37. The figure above shows the market for the chemical hydrogen sulfide, the production of which creates an external cost. The government imposes the tax shown in the above figure. What quantity is produced after the tax is imposed?a. zero poundsb. 80 million poundsc. 160 million poundsd. more than 160 million poundse. more than 80 million pounds and less than 160 million pounds.

____ 38. The figure above shows the market for the chemical hydrogen sulfide, the production of which creates an external cost. The government imposes the tax shown in the figure. How much tax revenue does the government collect?a. $640 millionb. $320 millionc. $240 milliond. More than $640 millione. Zero because the government has taxed the firms out of business.

Name: ________________________ ID: A

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____ 39. The figure above shows a tax imposed on a good with an external cost. The area of the rectangle abcd equalsa. the MSB.b. the total tax revenue collected by the government.c. the amount of pollution tax per ton.d. the MC.e. the deadweight loss.

____ 40. If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000, she will attend college if the cost of attendance is no more thana. $55,000.b. $45,000.c. $40,000.d. $25,000.e. $15,000.

____ 41. A example of a good with external benefits isa. a pizza.b. a dose of flu vaccine.c. a sewing machine.d. an imported good.e. a pair of running shoes

____ 42. Which of the following is true?a. MSB = MB + Marginal external benefit.b. MB = Marginal external benefit – MSB.c. MB = Marginal external benefit + MSC.d. MSB = Marginal external cost – marginal external benefit.e. MSB = MB + Marginal external benefit – Marginal external cost.

Name: ________________________ ID: A

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____ 43. MSB equalsa. MC + the marginal external cost.b. MC + the marginal external benefit.c. MB + the marginal external cost.d. MB + the marginal external benefit.e. MB + MC

____ 44. If a marginal external benefit is present in the consumption of a good or service, thena. pollution is not paid for.b. the marginal social benefit is greater than the marginal private benefit.c. the marginal social benefit is equal to the marginal private benefit.d. the marginal private benefit is equal to the marginal social benefit plus the marginal

external benefit.e. the marginal external benefit is equal to the marginal private benefit minus the marginal

social benefit.

____ 45. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the equilibrium price of private education isa. $12,000.b. $16,000.c. $20,000.d. $4,000.e. $6,000.

Name: ________________________ ID: A

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____ 46. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the equilibrium number of students being privately educated isa. 0 students.b. 200 students.c. 400 students.d. 600 students.e. None of the above answers is correct.

____ 47. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the equilibrium number of students being privately educated is ____ and the efficient quantity is ____.a. 0 students; 400 studentsb. 400 students; 400 studentsc. 400 students; 600 studentsd. 600 students; 400 studentse. 600 students; 600 students

____ 48. The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the deadweight loss equalsa. 0.b. $800,000.c. $1,600,000.d. more than $1,600,000.e. more than $800,000 and less than $1,600,000.

____ 49. Which of the following are devices that the government uses to achieve a more efficient allocation of resources in the presence of external benefits?a. taxes, subsidies, and regulationb. patents, taxes, and subsidiesc. regulations, copyrights, and vouchersd. vouchers, patents, and subsidiese. patents, taxes, and vouchers

____ 50. The government can overcome the inefficiency created by a good with an external benefit by usinga. public provision.b. marketable permits.c. taxes.d. emission charges.e. None of the above answers is correct.

____ 51. Public provisiona. is the production of a good by the government by giving funds to private producers.b. lowers the marginal cost of producing the good.c. means the good is produced by a public authority that receives the most of its revenue

from the government.d. Both answers A and B are correct.e. Both answers B and C are correct.

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____ 52. The production of a good or service by an authority that receives the most of its revenue from the government is referred to asa. public provision.b. private subsidies.c. vouchers.d. patents and copyrights.e. Coasian production.

____ 53. A subsidy isa. the revenue received from the government to produce a good or service by a public

authority.b. a voucher received by the government from producers of goods and services.c. a payment that the government makes to private producers of goods and services.d. a tax imposed on the producers of certain goods or services.e. a tax imposed on the consumers of certain goods or services.

____ 54. A payment made by the government to private producers of roads and libraries would be an example ofa. a subsidy.b. a copyright.c. a voucher.d. public provision.e. a Coase payment.

____ 55. A government subsidya. is a policy that can be used to help eliminate the deadweight loss from an external cost.b. can help achieve an efficient amount of output when the good has an external benefit.c. increases consumers' marginal benefit from the good.d. Both answers A and C are correct.e. Both answers B and C are correct.

____ 56. A government subsidy paid to a firmi. increases the demand for the good.ii. has no effect on the supply of the good.iii. leads to an increase in the equilibrium quantity.

a. i only.b. i and ii.c. ii only.d. iii only.e. i and iii.

____ 57. President Bush has proposed giving parents of children in poorly performing schools tax dollars to help send their children to private schools. This proposal is an example ofa. vouchers.b. public provision.c. external costs.d. taxes.e. correcting an externality using a Coase good.

____ 58. Food stamps provided by the government to households are an example ofa. vouchers.b. marginal benefits from producing a good or service.c. marginal cost from producing a good or service.d. marginal external cost.e. a Coase good.

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____ 59. Education has an external benefit. So to achieve the efficient level of education, an education voucher must equal the difference between thea. marginal (private) cost and the marginal social benefit.b. marginal (private) benefit and the marginal social benefit.c. marginal social benefit and the marginal (private) cost.d. dollar price and marginal (private) cost.e. marginal (private) cost and the marginal social cost.

____ 60. If a situation in which a previously ignored external benefit is overcome by the use of vouchers given to consumers, then the supply curve ____ and the demand curve ____.a. shifts leftward; shifts leftwardb. shifts leftward; shifts rightwardc. shifts rightward; shifts rightwardd. does not shift; shifts rightwarde. shifts rightward; does not shift

____ 61. The figure above shows an education market in which the government is providing households with vouchers. What is the dollar value of a voucher in this market?a. $4,000b. $8,000c. $12,000d. $16,000e. None of the above answers is correct.

____ 62. The figure above shows an education market in which the government is providing households with vouchers. In total, how much do the schools receive for a student?a. $4,000b. $8,000c. $12,000d. $16,000e. $20,000

Name: ________________________ ID: A

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____ 63. The figure above shows an education market in which the government is providing households with vouchers. Excluding the voucher, what do the students pay the schools?a. $4,000b. $8,000c. $12,000d. $16,000e. $0

____ 64. The figure shows the market for college education. If the market for education is competitive and with no government intervention, the equilibrium quantity of college students is ____ million and the efficient quantity of college students is ____ million.a. 2; 4b. 8; 2c. 8; 4d. 4; 8e. 0; 10

____ 65. The figure shows the market for college education. The efficient number of students isa. less than 4 million.b. more than 4 million and less than 8 million.c. 4 million.d. 8 million.e. more than 8 million.

____ 66. The figure shows the market for college education. In order for the efficient amount of education to occur, the government could provide a subsidy of ____ per student.a. $4,000b. $8,000c. $12,000d. $20,000e. $16,000

Name: ________________________ ID: A

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____ 67. The figure shows the market for college education. In order for the efficient amount of education to occur, the government could provide a voucher of ____ per student.a. $4,000b. $8,000c. $12,000d. $20,000e. $16,000

____ 68. A patent is defined as aa. token from the government that allows consumption of a good or service.b. provision of a good or service by a public entity.c. payment made by the government to a private producer.d. government-sanctioned right to produce a good or service.e. voucher given to a producer.

____ 69. Which theorem is the government applying when it grants patents and copyrights to creators for their intellectual property?a. the Coase theoremb. the public subsidy theoremc. the voucher theoremd. the public provision theoreme. the patent theorem

____ 70. A noisy party that keeps neighbors awake is an example of aa. negative production externality.b. positive production externality.c. negative consumption externality.d. positive consumption externality.e. Both answers B and C are correct.

____ 71. An externality can be a cost or benefit arising from the production of a good that falls upona. consumers but not producers.b. producers but not consumers.c. both the consumer and the producer.d. someone other than the consumer or producer.e. no one so it goes unpaid.

____ 72. Externalitiesa. are important in the areas of environment and education.b. only have a negative impact on people.c. deal with issues that are not our internal issues.d. affect the people who are responsible for production.e. are nonexistent in unregulated, competitive markets.

____ 73. In a market with an external cost, government actiona. cannot decrease the amount of the deadweight loss from the external cost.b. can sometimes help to achieve an efficient outcome.c. cannot alter firms' cost curves.d. Both answers A and C are correct.e. Both answers B and C are correct.

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____ 74. A competitive, unregulated market woulda. produce too much pollution because pollution is an external cost.b. produce too little education because education has an external benefit.c. fail to achieve equilibrium if there are externalities present.d. Both answers A and B are correct.e. Both answers B and C are correct.

____ 75. When property rights are assigned and transactions costs are lowa. all costs and benefits are taken into account by the transacting parties so the transaction is

efficient.b. externalities will result in market failure.c. the marginal social benefit curve shifts leftward and the marginal social cost curve does

not shift.d. the marginal social cost curve shifts rightward and the marginal social benefit curve does

not shift.e. the marginal social cost curve shifts rightward and the marginal social benefit curve shifts

rightward.____ 76. When people decide whether or not to get a flu vaccination, they ignore the ____ and as a result ____.

a. marginal private benefit; too few vaccinations are givenb. external benefit; too few vaccinations are givenc. private cost; too many vaccinations are givend. marginal external cost; vouchers must be providede. social cost; too many vaccinations are given

____ 77. Regulation consists of rules administered by ____ to influence economic activity by determining prices, product standards and types, and the conditions in which firms may enter an industry.a. the Supreme Courtb. the Senatec. the Presidentd. government agenciese. the states

____ 78. When a government agency establishes rules to influence economic activity, this process is referred to asa. regulation.b. public interest theory.c. capture theory.d. deregulation.e. a natural monopoly.

____ 79. Deregulation is defined as thea. use of government rules to regulate business activity.b. implementation of industry-wide restrictions on prices.c. theory of businesses maximizing profits with government assistance.d. removal of restrictions on business activities.e. change from public interest to the capture theory of regulation.

____ 80. The first national regulatory agency to be set up in the United States was thea. Environmental Protection Agency.b. Interstate Commerce Commission.c. Food and Drug Administration.d. Federal Aviation Administration.e. Federal Reserve System.

Name: ________________________ ID: A

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____ 81. The purpose of the first federal regulatory agency in the United States was toa. assure food safety.b. assure airplane safety.c. control prices and routes of railroads.d. measure the efficacy of new drugs.e. assure the safety of atomic energy plants.

____ 82. By the 1970s approximately what percentage of the economy was subject to some form of regulation?a. 10 percentb. 25 percentc. 3 percentd. 17 percente. 67 percent

____ 83. Regulation of businesses in the United States can best be described as beginning in thea. late 1960s and growing steadily over the next 40 years.b. early 1900s and growing steadily over the next 80 years.c. 1930s and growing in spurts over the next 70 years.d. late 1800s and growing in spurts until the 1970s after which it has begun to move toward

more deregulation.e. 1930s and growing in spurts until the 1970s after which it has grown more steadily.

____ 84. Which of the following is NOT a common part of the regulatory process?i. appointments of people who run the regulatory agencies by the Administration,

Congress, and state and local governmentsii. price controls set by regulatory agenciesiii. regulatory determination of the production technologyiv. the establishment of operating rules for business firms

a. i only.b. ii and iv.c. iii only.d. i, ii, and iii.e. ii, iii, and iv.

____ 85. The public interest theory of regulation is thata. regulators help producers maximize economic profit.b. regulation seeks to increase the government's revenue.c. regulation causes producers to produce at a point where they are earning normal profits.d. regulation seeks an efficient use of resources.e. regulation focuses on the consumers' interests and ignores producers' interests.

____ 86. Efforts by the government to regulate a firm and bring the price down to competitive levelsa. reduces the consumer surplus.b. creates more deadweight loss.c. is what the public interest theory of regulation predicts regulators will do.d. is what the capture theory of regulation predicts regulators will do.e. is why rate of return regulation is considered the most efficient type of regulation.

Name: ________________________ ID: A

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____ 87. The public interest theory of regulation asserts that the purpose of regulating a natural monopoly is toi. minimize the deadweight loss created by a monopoly.ii. maximize economic profit.iii. minimize consumer surplus.

a. i only.b. ii and iii.c. iii only.d. i and ii.e. ii only.

____ 88. The capture theory of regulation is that regulationsa. help producers to maximize economic profits.b. mean producers suffer losses.c. result in diseconomies of scale.d. benefit society, not producers.e. benefit the regulators, not the producers or the consumers.

____ 89. If the capture theory of regulation is correct, thena. a marginal cost pricing rule is used to ensure maximum profits.b. an average cost pricing rule is used to ensure an efficient output.c. the regulators let the firm produce where marginal cost equals marginal revenue to ensure

maximum profits.d. subsidies are used to allow marginal cost pricing without an economic loss.e. regulation seeks an efficient use of resources.

____ 90. A natural monopoly exists whena. diseconomies of scale exist in an industry.b. one firm can supply an entire market at a lower average total cost than can two or more

firms.c. a firm can engage in price discrimination.d. the producers in an industry have formed a cartel.e. a monopoly firm faces a horizontal demand curve.

____ 91. A natural monopoly is one that arises froma. patent law.b. economies of scale.c. copyright law.d. any government-imposed barrier to entry.e. mergers.

____ 92. With a natural monopolya. no regulation is necessary because it is a natural monopoly.b. regulation takes the form of forcing competition from new firms.c. regulation takes the form of forcing the company out of business.d. regulation can take the form of average cost pricing to allow coverage of costs.e. regulation takes the form of breaking the company into several competing firms.

Name: ________________________ ID: A

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____ 93. A natural monopoly's average cost curvei. intersects the demand curve while the average cost curve slopes downward.ii. reaches its minimum before it intersects the demand curve.iii. intersects the demand curve below the intersection of the marginal cost curve and the

demand curve.

a. i only.b. ii only.c. iii only.d. i and iii.e. i, ii, and iii.

____ 94. A firm that is a natural monopolya. can supply the entire market at a lower cost than two or more firms.b. has very small fixed costs and very large marginal costs.c. is infrequently regulated because having one firm serve the market is economically

sound.d. cannot make an economic profit if it is not regulated because it must serve a very large

customer base.e. produces the efficient quantity of output when it is not regulated.

____ 95. For a regulated natural monopoly, the marginal cost pricing rule is a rule that sets price ____ marginal cost and achieves an ____ amount of output.a. equal to; efficientb. above; inefficientc. below; efficientd. equal to; inefficiente. above; efficient

____ 96. A marginal cost pricing rule sets marginal cost equal toa. minimum average variable cost.b. price.c. average cost.d. marginal revenue.e. the smaller of price or marginal revenue.

____ 97. If a natural monopoly is regulated usinga. a marginal cost pricing rule, the firm maximizes its profit.b. an average cost pricing rule, the firm incurs an economic loss.c. a total cost pricing rule, the firm will exit the industry.d. a marginal cost pricing rule, the firm incurs an economic loss.e. an average cost pricing rule, the firm maximizes its profit.

____ 98. Under a marginal cost pricing rule, a natural monopolya. earns a reasonable profit.b. earns large economic profits.c. earns accounting profits, but breaks even in economic terms.d. incurs an economic loss.e. earns a normal profit but it cannot be determined whether or not it earns an accounting

profit.

Name: ________________________ ID: A

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____ 99. To achieve efficiency in a market served by a natural monopoly, the regulatory agency musti. use an average cost pricing ruleii. require the firm to charge a price equal to marginal cost.iii. allow the firm to maximize its profit.

a. i only.b. ii only.c. iii only.d. i and ii.e. ii and iii.

____ 100. If a regulatory agency sets the price equal to marginal cost for a natural monopoly, thea. government might have to provide a subsidy to the firm to keep it in business.b. price is the same as the unregulated monopoly price.c. firm earns an economic profit, though not the maximum economic profit.d. firm earns the maximum economic profit.e. firm earns a normal profit.

____ 101. If we compare regulating a natural monopoly using marginal cost pricing to that using average cost pricing, we see that output isa. greater with marginal cost pricing but average cost pricing allows for costs to be covered.b. the same under both cases but the profit is greater with average cost pricing.c. greater under average cost pricing but profits are greater with marginal cost pricing.d. the same but profits are greater with marginal cost pricing.e. greater with marginal cost pricing and the firm's profit is larger with marginal cost

pricing.

____ 102. The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC is left unregulated, what is the price of cable television in Oakland?a. $40b. $30c. $20d. $10e. $50

Name: ________________________ ID: A

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____ 103. The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, how many households in Oakland are served?a. 20,000b. 30,000c. 40,000d. 50,000e. 10,000

____ 104. The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under an average cost pricing rule, what is the price of cable television in Oakland?a. $40b. $30c. $20d. $10e. $50

____ 105. The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. Compared to a marginal cost pricing rule, under an average cost pricing rule, TWC ____ output by ____ households.a. increases; 20,000b. decreases; 10,000c. increases; 30,000d. decreases; 50,000e. decreases; 40,000

____ 106. A regulation that sets the price at a level that enables a regulated firm to earn a specified target percent return on its capital is calleda. consumer surplus regulation.b. producer surplus regulation.c. capital regulation.d. rate of return regulation.e. rate of profit regulation.

____ 107. One of the tendencies that is common among firms regulated using rate of return regulation is toa. increase production to an inefficient level.b. exaggerate the costs of production.c. incur losses.d. understate the costs of production.e. overstate their total revenue.

____ 108. If a natural monopoly exaggerates its costs, thena. it earns a normal profit.b. its average cost curve shifts downward.c. with rate of return regulation, the price it is allowed to charge rises.d. with price cap regulation, the price it is allowed to charge rises.e. the firm definitely incurs an economic loss.

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____ 109. Regulation that motivates firms to reduce costs so that they can make and keep all or part of an economic profit is calleda. price cap regulation.b. exaggerated cost regulation.c. capturing the regulator.d. rate of return regulation.e. marginal profit regulation.

____ 110. Price cap regulation is defined as regulation thata. motivates the firm to operate efficiently and keep costs under control.b. encourages firms to exaggerate costs to increase profits.c. uses marginal cost pricing to ensure efficient output.d. uses average cost pricing to ensure costs are covered.e. is essentially the same as rate of return regulation.

____ 111. Price cap regulationa. does not provide incentives to firms to minimize their costs because firms cannot change

prices.b. sets the maximum price these firms can charge.c. gives firms the incentive to exaggerate their costs.d. Both answers A and C are correct.e. Both answers A and B are correct.

____ 112. Under earnings-sharing regulation, if a firm's profits ____ above a certain level, they must be shared with the firm's ____.a. rise; customersb. fall; customersc. rise; suppliersd. fall; supplierse. rise; competitors

____ 113. If public interest regulation is used to regulate an oligopoly,a. it is done so in order to insure that the oligopoly is able to maximize profits.b. the output is equal to the monopoly output.c. the output is equal to the perfectly competitive output.d. producer's interests will be met.e. the output is the same as if the industry was not regulated.

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____ 114. Suppose the government decides to re-regulate the airline market. The above figure represents a possible situation at the Ronald Reagan International Airport in Washington, D.C. Under producer interest regulation, how many flights leave this airport each day?a. 0b. 400c. 600d. 1,000e. 800

____ 115. Suppose the government decides to re-regulate the airline market. The above figure represents a possible situation at the Ronald Reagan International Airport in Washington, D.C. Under public interest regulation, how many flights leave this airport each day?a. 0b. 400c. 600d. 1,000e. 800

____ 116. Suppose the government decides to re-regulate the airline market. The above figure represents a possible situation at the Ronald Reagan International Airport in Washington, D.C. Under public interest regulation, what is the average price per flight?a. $1,000b. $600c. $400d. $200e. $0

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____ 117. The focus of antitrust legislation is toa. encourage cartels to form because they are easier to regulate.b. maintain competition.c. force society to act in the best interest of producers.d. limit the power of regulatory bodies.e. ensure that producers earn enough profit to stay in business so that consumers are not

harmed by too many businesses closing.____ 118. Section 1 of the Sherman Antitrust Act declares what to be illegal?

a. every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations

b. mergers of a horizontal naturec. any attempt to monopolize an industryd. sharing of technology among competing firms or mergers where the effect is to lessen

competitione. exiting an industry if the remaining firm or firms have a market share that is too large.

____ 119. According to Section 2 of the Sherman Act, which of the following is a felony?a. mergers of a vertical natureb. horizontal mergersc. attempts to monopolize an industryd. price increases among competing firms that occur simultaneouslye. using the HHI to justify a merger

____ 120. Under what conditions would it be legal for two bakeries in Minneapolis to explicitly agree to raise their prices by 5 percent?a. if the price rise was not predatoryb. if the price rise did not measurably increase producer surplusc. neverd. if the price rise did not harm consumers in the long run by reducing competitione. if the price rise was necessary to keep one or both bakeries from closing.

____ 121. The government believes that which entry barrier has allowed Microsoft to gain monopoly power?a. ownership of the entire supply of a resourceb. patentsc. trademarksd. economies of scale and network economiese. territorial confinement

____ 122. When an oligopoly reduces its price with the intent of driving away its competitors, it is said to be engaging ina. pricing differential.b. predatory pricing.c. price fixing.d. a price-tying agreement.e. price discrimination.

____ 123. Which of the following indices does the Department of Justice use to determine whether or not to examine a merger?a. the Clayton Index of market concentrationb. the producer concentration indexc. the Herfindahl-Hirschman indexd. the Sherman antitrust indexe. the index of prices

Name: ________________________ ID: A

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____ 124. If the Herfindahl-Hirschman Index (HHI) for a market is between 1,000 and 1,800, the Department of Justice will examinea. all mergers.b. no mergers.c. mergers that raise the HHI by 100 or more points.d. mergers that raise the HHI by 100 or fewer point.e. mergers that lower the HHI by 100 or more points.

____ 125. Suppose there are 6 firms in an industry with the following market shares. If the two smallest firms want to merge, how will the Department of Justice reply?Firm 1: 30Firm 2: 25Firm 3: 25Firm 4: 10Firm 5: 7Firm 6: 3

a. The firms will be allowed to merge and compete with the larger firms.b. The firms will be challenged because the merger will raise the HHI by more than 50

points.c. The firms will not be allowed to merge.d. The firms will be challenged because the merger will raise the HHI by more than 100

points.e. The firms will be challenged because the merger will raise the HHI by more than 250

points.____ 126. ____ regulation of a natural monopoly results in an efficient level of output.

a. Efficient resale price maintenanceb. Marginal cost pricingc. Average cost pricingd. Predatory pricinge. Tying

____ 127. If a natural monopoly is regulated so it uses a marginal cost pricing rule, the firma. must have violated the Sherman Act.b. earns zero economic profit.c. might be able to use a two-part tariff to avoid incurring an economic loss.d. also faces earnings share regulation.e. finds that its HHI must fall.

____ 128. If a firm has become a natural monopoly,a. it has violated the Clayton Act.b. the Department of Justice approved its merger.c. regulators will require that it produce the efficient level of output.d. it might be regulated using price cap regulation.e. it cannot be charged with any violation of the antitrust laws.

Name: ________________________ ID: A

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____ 129. The figure above shows a natural monopoly that the government must regulate. If the government uses ____, the firm produces ____ units per week.a. the HHI; 50b. an average cost pricing rule; 30c. rate of return regulation; 40d. the Sherman Act; 30e. a marginal cost pricing rule; 20

____ 130. Earnings share regulation occurs whena. the HHI for an industry exceeds 1,800.b. price cap regulation allows a firm's profits to rise above a target level.c. firms are regulated using marginal cost pricing.d. a firm violates the Sherman Act.e. a firm violates any antitrust law.

____ 131. Tying arrangements area. illegal if they substantially lessen competition.b. used by regulators to force a monopoly to produce an efficient amount of production.c. used by regulators to force a monopoly to charge an efficient price.d. illegal according to the Sherman Act.e. necessary in order for a firm to price discriminate.

____ 132. Resale price maintenance is a form ofa. regulation.b. marginal cost pricing.c. average cost pricing.d. agreeing about the price that will be charged.e. setting the price cap under price cap regulation.

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____ 133. When the Department of Justice decides whether to allow firms in an industry to merge, it uses the ____ to guide its decision.a. public interest theoryb. HHIc. capture theoryd. Sherman Acte. predatory pricing theory

____ 134. Which of the following is NOT a factor of production?a. laborb. capitalc. entrepreneurshipd. bonds.e. land.

____ 135. An entrepreneura. creates firms and hires the factors of production.b. has no human capital, only financial capital.c. must have a patent on the product or service that he or she sells.d. owns the land upon which the business operates.e. None of the above answers is correct.

____ 136. The knowledge, skills, education and training an individual possesses is known asa. physical capital.b. human capital.c. labor capital.d. resource capital.e. entrepreneurial capital.

____ 137. People's education and skills area. called entrepreneurship.b. not tradable.c. called human capital.d. part of financial capital.e. called entrepreneurial capital.

____ 138. Labor consists of thea. financial contribution to the production of goods and services made by individuals.b. mental and physical contribution made to the production of goods and services by

individuals.c. entrepreneurial contribution to the production process of goods and services made by

individuals.d. contribution of capital goods made by individuals to the production process for goods

and services.e. None of the above answers is correct.

____ 139. Financial capital is defined asa. machinery used to produce goods and services.b. specific machinery used to make money.c. funds used to buy and operate capital such as machinery.d. the funds produced by the work of capital.e. the skills and talents possessed by people.

Name: ________________________ ID: A

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____ 140. Stocks and bonds area. traded in financial markets.b. types of entrepreneurship.c. the same as physical capital.d. traded in commodity markets.e. traded in physical capital markets.

____ 141. As a factor of production, any of the gifts of nature are calleda. land.b. labor.c. capital.d. entrepreneurial ability.e. physical capital.

____ 142. Commodity markets are wherea. labor is bought and sold.b. shares of ownership of a corporation are traded.c. raw materials are bought and sold.d. promises to pay specified sums of money are exchanged.e. the actual physical capital is bought and sold.

____ 143. The markets for raw materials are called ____ markets.a. stockb. resourcec. landd. commoditye. raw

____ 144. Derived demand means that the demand for a factor of production is derived from thea. supply of that factor of production.b. price of that factor of production.c. demand for the goods and services the factor of production is used to produce.d. costs of production.e. government, which forces large firms to hire at least some minimum number of different

resources.____ 145. In the labor market,

a. households demand labor.b. firms demand labor.c. firms supply labor.d. wage are determined only by firms alone.e. None of the above answers is correct.

____ 146. Which of the following represents a derived demand? Demand fora. a taco by Sam when she is hungry.b. golf balls by Jose who is planning on going golfing with his boss.c. a grocery clerk by the local Safeway.d. an automobile by Jack who wants a car to get to school.e. new clothing by Shiniq who is starting a new job.

____ 147. The demand for carpenters needed to build houses represents aa. direct demand.b. derived demand.c. marginal demand/cost for input.d. supplied demand.e. directed supply.

Name: ________________________ ID: A

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____ 148. The value of the marginal product is equal toa. marginal product × marginal cost.b. marginal product × product price.c. marginal revenue × marginal cost.d. marginal cost × product price.e. marginal product ÷ product price.

____ 149. If UPS hires another worker, UPS will be able to deliver an additional 20 packages an hour. The price of each package is $5. The value of this worker's marginal product is equal toa. $5.b. $100.c. $4.d. 20 packages.e. $20.

____ 150. The value of marginal product is equal to thea. additional revenue from selling one more unit of the product.b. change in total revenue from selling one more unit of product.c. additional cost of hiring one more unit of a factor of production.d. change in revenue from hiring one more unit of a factor of production.e. change in total cost when one more unit of the product is produced.

____ 151. Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires one trainer, the value of the marginal product of this trainer equalsa. 4 clients.b. $164.c. $410.d. $41.e. None of the above answers is correct.

____ 152. Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires three trainers, the value of the marginal product of the third trainer equalsa. 2 clients.b. $82.c. 9 clients.d. $369.e. $123.

Name: ________________________ ID: A

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____ 153. Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires four trainers, the value of the marginal product of the fourth trainer equalsa. 10 clients.b. $410.c. $41.d. 1 client.e. $10.25.

____ 154. The rule for employing a profit-maximizing amount of labor is to continue to hire additional workers until the additional worker's value of marginal product isa. less than the wage rate.b. equal to the wage rate.c. greater than 1.d. less than the price of the product.e. equal to the price of the product.

____ 155. Suppose the Miami Dolphins are considering adding another backup quarterback to their roster. If the salary the Dolphins would have to pay equals $500,000 and the value of the marginal product of the new quarterback equals $800,000, to maximize their profit the Dolphins shoulda. add the new quarterback.b. add two new quarterbacks.c. not add the new quarterback.d. not add the new quarterback and, in fact, get rid of at least one other backup quarterback.e. Not enough information is given to determine if the Dolphins should hire the

quarterback.____ 156. If a firm finds itself at the point where the value of the marginal product of labor is greater than its wage rate,

then the firma. stops hiring more workers but does not fire any because the firm is maximizing its profit.b. decreases the number of workers it has hired in order to increase its profit.c. increases the number of workers it hires in order to increase its profit.d. increases sales to keep its employees busy.e. changes its employment of workers and maximizes its profit by hiring the number of

workers that makes the difference between the value of the marginal product and the wage rate as large as possible.

____ 157. The demand curve for labor is the same as the firm'sa. marginal revenue curve.b. marginal cost curve.c. value of marginal product curve.d. wage rate curve.e. supply of output curve.

____ 158. If we compare the value of marginal product curve and the demand for labor curve we see thata. they are the same thing.b. the value of marginal product curve is twice as steep.c. the demand for labor curve has no relationship to the value of marginal product curve.d. the demand for labor curve is twice as steep but they share the same axes.e. the demand for labor curve lies above the value of marginal product curve.

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____ 159. A firm's demand for labor curve shifts when there is a change ini. the supply of labor.ii. populationiii. the equilibrium wage rate.

a. i only.b. ii onlyc. i and iii.d. i and ii.e. ii and iii.

____ 160. The above figure shows the initial demand for labor curve at the local Pizza Hut. The wage rate is $6 an hour. If the demand for pizzas increases so that the price of a pizza rises,a. at the wage rate of $6 per hour, Pizza Hut hires fewer than 10 workers.b. Pizza Hut's demand for labor curve shifts rightward.c. the supply of labor curve shifts rightward.d. Pizza Hut's demand for labor curve shifts leftward.e. the supply of labor curve shifts leftward.

____ 161. Robotic technology is a substitute for labor in many manufacturing processes. If the price of robotic technology decreases and the scale of the firm's production does not change, there isa. a decrease in the demand for labor.b. an increase in the demand for labor.c. no change in the demand for labor.d. an increase in the supply of labor.e. a decrease in the supply of labor.

____ 162. As a result of the proliferation of ATM machines, the demand for bank tellers hasa. increased.b. decreased.c. not changed.d. become perfectly inelastic.e. become perfectly elastic.

Name: ________________________ ID: A

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____ 163. The supply of labor curve for an individual isa. upward sloping at all wage rates.b. downward sloping at all wage rates.c. upward sloping for lower wage rates and begins to slope downward at higher wage rates.d. downward sloping for lower wage rates and begins to slope upward at higher wage rates.e. an upside-down U-shape.

____ 164. Because leisure time has value to many workers, as wages increase the labor supply curvea. has a positive slope.b. bends backwards and has a negative slope.c. becomes a horizontal line.d. becomes a vertical line.e. bends forward and has a positive slope.

____ 165. According to a recent prediction in The Wall Street Journal the adult population of Russia will decline dramatically over the next few decades. If this prediction is correct, the supply of labor in Russia willa. increase.b. not change.c. decrease.d. become less elastic.e. become more elastic.

____ 166. If the wage rate increases, thena. the quantity of labor supplied definitely decreases.b. there is a movement upward along the supply of labor curve.c. the supply of labor curve shifts rightward.d. the supply of labor curve shifts left ward.e. the quantity of labor supplied definitely increases.

____ 167. Which of the following shift the supply of labor curve leftward?i. an advancement in technologyii. a decrease in the price of the product that the labor producesiii. a decrease in the adult population

a. i and iib. ii and iiic. ii onlyd. iii onlye. i, ii, and iii

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____ 168. The figure above shows the market supply of labor curve. Which of the following might be the reason the labor supply curve shifted from S0 to S1?a. an increase in technologyb. a decrease in technologyc. an increase in the number of women in the work forced. a decrease in the adult populatione. an increase in the wage rate

____ 169. The figure above shows the market supply of labor curve. Which of the following might be the reason the labor supply curve shifted from S0 to S1?a. an increase in technologyb. a decrease in technologyc. a decrease in the number of women in the work forced. an increase in the adult populatione. an increase in the wage rate.

____ 170. Suppose in Philadelphia the quantity of economists demanded is less than the quantity supplied by 2,000 economists. As a result,a. there is a shortage of economists in Philadelphia.b. salaries for economists fall.c. there is equilibrium in this market.d. the labor supply curve for economists in Philadelphia is vertical.e. the labor demand curve for economists in Philadelphia shifts rightward.

____ 171. Other things remaining the same, thea. higher the interest rate, the greater the quantity of financial capital demanded.b. lower the interest rate, the smaller the quantity of financial capital demanded.c. higher the interest rate, the smaller the quantity of financial capital demanded.d. interest rate and the quantity of financial capital demanded are not related.e. higher the interest rate, the more the demand for financial capital decreases.

____ 172. Two main factors that change the demand for capital and shift the demand curve for capital area. population growth and technological change.b. population growth and the interest rate.c. the interest rate and technological change.d. the supply of capital and technological change.e. the interest rate and the supply of capital

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____ 173. Two main factors that change the demand for capital and shift the demand for capital curve area. the weather and the interest rate.b. the interest rate and oil prices.c. the wage rate and the interest rate.d. population growth and technological change.e. the interest rate and the rental rate.

____ 174. The demand for financial capital increases and the demand curve shifts rightward ifa. the population decreases.b. the interest rate increases.c. the population increases.d. people expect lower incomes in the future.e. None of the above answers is correct.

____ 175. An increase in the interest rate ____ the quantity of financial capital demanded and ____ the quantity of financial capital supplied.a. increases; increasesb. increases; decreasesc. decreases; increasesd. decreases; decreasese. does not change; does not change

____ 176. People tend to save morea. when they are students.b. in middle age.c. after retirement.d. when they expect their income to be higher in the future.e. None of the above answers is correct.

____ 177. If the interest rate increases, thena. the opportunity cost of current consumption is higher.b. the quantity of financial capital demanded increases.c. the quantity of financial capital supplied decreases.d. saving decreases.e. the demand for financial capital decreases.

____ 178. Suppose that people in Taiwan expect their incomes to increase in the future. As a result,a. the supply of financial capital increases.b. the demand for capital decreases.c. the demand for capital increases.d. the supply of financial capital decreases.e. neither the supply of financial capital nor the demand for financial capital change.

____ 179. Which of the following is true about the market for financial capital?a. The demand for capital curve is upward sloping and the supply of capital curve is

downward sloping.b. An increase in technology unambiguously shifts the demand for capital curve leftward.c. The supply of capital curve is upward sloping and the demand for capital curve is

downward sloping.d. The supply of capital curve is vertical and the demand for capital curve is downward

sloping.e. None of the above answers is correct.

Name: ________________________ ID: A

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____ 180. Consider the market for financial capital. Suppose the equilibrium interest rate is 6 percent. If expected future incomes increase,a. there is only a movement upward along the supply curve.b. there is only a movement downward along the supply curve.c. the interest rate falls below 6 percent.d. the interest rate rises above 6 percent.e. the demand curve for financial capital shifts rightward and the interest rate rises above 6

percent.____ 181.

In the above figure, if the interest rate is above 6 percenta. there is a shortage of financial capital.b. there is a surplus of financial capital.c. the demand for financial capital increases.d. the supply of financial capital increases.e. the demand for financial capital increases and the supply of financial capital decreases..

____ 182. One of the reasons why interest rates do not persistently increase or decrease over time is because the demand for capitala. and the supply of capital both tend to decrease over time.b. increases while the supply of capital decreases.c. and the supply of capital both increase by roughly the same amount over time.d. decreases while the supply of capital increases.e. and the supply of capital do not grow very much from year to year.

____ 183. Nonrenewable natural resources are resourcesa. that can be used repeatedly.b. for which the demand is perfectly elastic.c. for which the supply is perfectly inelastic.d. that can be used only once, and that cannot be replaced once they have been used.e. for which the entire factor income is economic rent.

____ 184. Landa. is a nonrenewable resource.b. has an elastic supply but not perfectly elastic.c. is the only factor of production that is not traded in a market.d. has a perfectly inelastic supply.e. has a perfectly elastic supply.

Name: ________________________ ID: A

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____ 185. Rent is the payment for the resource land. The lower the rent, the greater thea. demand for land.b. quantity demanded of land.c. supply of land.d. elasticity of supply for land.e. quantity supplied of land.

____ 186. The supply curve for land in Oregon isa. negatively sloped.b. positively sloped.c. vertical.d. horizontal.e. U-shaped.

____ 187. As the price of land rises, the quantity supplieda. increases.b. decreases.c. at first increases and then decreases.d. stays the same.e. at first decreases and then increases.

____ 188. The price of land isa. fixed.b. determined by demand.c. determined by supply.d. profit.e. rent and is all opportunity cost because land is fixed in supply.

____ 189. Economic rent is defined as the incomea. only a landowner earns.b. any factor earns above its opportunity cost.c. that is equal to the value of the marginal product of the factor.d. any factor earns below its opportunity cost.e. that is nonrenewable.

____ 190. Economic rent is the income received by any factor of production ____ the amount required to induce a given quantity of the factor to be supplied.a. belowb. equal toc. over and aboved. regardless ofe. None of the above is correct because economic rent is the amount of demand that exists

over and above the amount that will employ the current amount of the factor.____ 191. The income required to attract a factor of production from its next-best alternative use is referred to as its

a. economic rent.b. opportunity cost.c. elasticity of demand.d. elasticity of supply.e. renewable supply.

Name: ________________________ ID: A

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____ 192. The price of nonrenewable resources such as metalsi. falls if new technologies enable these resources to be used more efficiently.ii. falls if more reserves are found than were previously unknown.iii. has fallen over recent years because forces that bring lower prices have outweighed the

forces that bring higher prices.

a. i and ii.b. i only.c. ii only.d. i and iii.e. i, ii, and iii.

____ 193. The stock marketa. is a market in which the stock of physical capital is traded.b. is a market in which shares in the stocks of companies are traded.c. measures the stock of physical capital available.d. determines the price of available resources.e. is the market in which shares of physical capital are traded.

____ 194. The value of marginal product curvea. is upward sloping because firms want to hire more workers to increase production.b. shows the price of a factor of production multiplied by the amount of the factor

employed.c. is the same as a firm's supply of labor curve.d. is downward sloping because each additional worker brings in a decreasing amount of

revenue.e. is U-shaped.

____ 195. Which rule does the United Corporation use when maximizing profit?a. Issue stock up to point where its price equals the cost of issuing bonds.b. If the value of the marginal product of labor exceeds the wage rate, hire fewer workers.c. Hire labor up to point at which the value of marginal product equals the wage rate.d. Reduce the wage rate until it equals the marginal product.e. Hire labor up to point at which the value of marginal product equals the price of the good

or service the labor produces for United Corporation.____ 196. In the market for financial capital, the ____ is measured on the vertical axis and the ____ is measured on the

horizontal axis.a. interest rate; quantity of physical capitalb. interest rate; quantity of financial capitalc. quantity of financial capital; economic rentd. quantity of physical capital; economic rente. economic rent; quantity of financial capital.

____ 197. The supply of labor curve for nurses shifts ifa. the wage rate paid nurses increases.b. there is an increase in the time spent in nursing school.c. the value of marginal product of nurses increases.d. the value of marginal product of nurses decreases.e. the marginal product of nurses decreases.

Name: ________________________ ID: A

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____ 198. The demand for labor curve of nurses shifts rightward if thea. value of marginal product of nurses increases.b. wage rate paid to nurses rises.c. economic rent earned by nurses decreases.d. wage rate paid to nurses falls.e. supply of labor curve for nurses shifts rightward.

____ 199. Which of the following curves is most inelastic?a. the supply of landb. the supply of labor for an individual workerc. the supply of labor for all workersd. the demand for capitale. the demand for labor

____ 200. An individual's labor supply curve is ____ because ____.a. backward bending; of large economic rentb. upward sloping; of large economic rentc. upward sloping; of lower opportunity cost at higher wagesd. backward bending; at high wages, workers choose to supply less labore. backward bending; at high wages, firms choose to employ less labor