Question 1

Suppose that every customer in a market wants to enjoy the good supplied by the best producer, and the good is produce with technology such that the best producer can supply to every customer at a low cost. This is an example of

the superstar phenomenon.
human capital.
efficiency wages.
signaling.

Question 2

The larger the number of firms in an oligopoly, the

lower the price and the smaller the output of the industry.
higher the price and the greater the output of the industry.
lower the price and the greater the output of the industry.
higher the price and the smaller the output of the industry.

Question 3

Signaling in labor markets and advertising are examples where an informed party uses the signal to convince the uninformed party that the informed party is offering something of high quality.

True
False

Question 4

Discrimination in the labor market occurs when employers pay different wages to workers who differ only by race, ethnicity, sex, age, or other personal characteristics.

True
False

Question 5

A strategy that is best for a player in a game regardless of the strategies chosen by the other players is called a(n)

game theory strategy.
dominant strategy.
prisoner's dilemma strategy.
oligopoly strategy.

Question 6

Movies and novels are examples of products sold in monopolistically-competitive industries.

True
False

Question 7

Hidden characteristics typically lead to

efficient outcomes.
adverse selection.
hidden actions.
moral hazard.

Question 8

Hidden actions typically lead to

efficient outcomes.
adverse selection.
hidden characteristics
moral hazard.

Question 9

The effect of an increase in interest rates on consumer savings in the current period is ambiguous.

True
False

Question 10

The slope of the budget constraint will change whenever the

income of the consumer changes.
slope of the consumer's indifference curve changes.
preferences of the consumer changes.
price of one of the two goods changes.

Question 11

Economists measure the social cost of a monopoly by calculating monopoly profits.

True
False

Question 12

Antitrust laws, regulation, public ownership, and doing nothing are all potential strategies that a government can use to deal with the problem of monopoly.

True
False

Question 13

Human capital is

machinery and equipment designed by humans.
the premium wages earned by highly-skilled workers.
labor resources earned by firms.
training.

Question 14

Economic mobility refers to the willingness of people to migrate across the United States to search for better jobs.

True
False

Question 15

A Nash equilibrium is a strategy that is best for a player in game regardless of the strategies chosen by the other players.

True
False

Question 16

Which of the following is not a controversial business practice that may be prohibited by antitrust laws?

import tariffs
predatory pricing
resale price maintenance
tying

Question 17

Which of the following is not a characteristic of a monopolistically-competitive market?

The goods offered for sale are identical.
There is free entry and exit
There are many sellers.
There are many buyers.

Question 18

For a monopolist, as output increases, the firm's total revenue

increases.
decreases.
first increases, then decreases.
first decreases, then increases.

Question 19

If there is a permanent increase in the demand for hybrid cars, hybrid car manufacturers will want to hire

fewer workers, which will cause wages in the industry to increase.
more workers, which will cause wages in the industry to decrease.
more workers, which will cause wages in the industry to increase.
fewer workers, which will cause wages in the industry to decrease.

Question 20

Which of the following statements is not an example of a compensating differential?

Older, more experienced workers are paid more than younger, less experienced workers.
Law professors are paid less than practicing lawyers because their working conditions are more pleasant.
Night-shift workers are paid more than day-shift workers because workers prefer to work during the daytime.
Coal miners are paid more than other workers with similar skills because coal mining is risky.

Question 21

The prisoner's dilemma game shows us that

the dominant strategy will always be the same for both decision makers.
following a logical, self-interested strategy may not result in the best outcome for decision makers.
the dominant strategy will always provide the best outcome for both decision makers.
cooperation among decision makers is common and easy to maintain.

Question 22

According to the Condorcet paradox, majority rule will produce the outcome most preferred by the median voter.

True
False

Question 23

An increase in the price of gasoline will likely lower the wages of oil workers.

True
False

Question 24

Factors of production are the inputs used to produce goods and services.

True
False

Question 25

An example of adverse selection is a parent who installs a hidden camera in the living room to observe the behavior of the family's nanny.

True
False

Question 26

For which of the following market structures does a profit-maximizing firm charge a price greater than marginal cost?

(i) Perfect competition
(ii) Monopolistic competition
(iii) Monoply

(ii) and (iii) only
(i), (ii), and (iii)
(i) only
(ii) only

Question 27

Of all the income earned in the United States before taxes in 2008, the richest fifth of households earn about

half.
one-tenth.
one-third.
three-fourths.

Question 28

A major critique of advertising is that it

promotes excessive competition among firms in the industry.
undermines the market price.
provides information to consumers that they would be better off without.
manipulates people's tastes and preferences.

Question 29

Which of the following is an example of signaling in the labor market?

Wages increase due to an increase in the demand for labor.
Earning a college degree demonstrates that the worker has high ability.
Earning a college degree increases a worker's human capital, which increases the wages earned by that worker.
Wages increase due to a decrease in the supply of labor.

Question 30

A cartel is an example of collusion among firms.

True
False

Question 31

Which of the following is not an example of screening to uncover private information?

A man gives a woman cash for her birthday because "everyone likes cash."
An automobile insurer charges a higher rate to drivers with more speeding tickets than to drivers with no speeding tickets.
Sarah is considering buying a used car from Alison. Before Sarah writes a check, she takes the car to an auto mechanic to inspect it.
A life insurance company requires that potential policy holders take a physical exam before being issued a policy.

Question 32

Which of the following would not increase the value of the marginal product of labor?

an increase in the price of the good sold by the firm
an increase in the number of workers available
a labor-augmenting technological advance
an increase in the supply of a factor of production used by workers

Question 33

Minimum-wage laws tend to

increase the unemployment of unskilled labor
increase the annual income levels of all unskilled workers.
increase the unemployment of skilled labor.
affect all workers similarly.

Question 34

The theory of efficiency wages predicts that firms will pay their workers a wage exactly equal to the value of the marginal product of labor.

True
False

Question 35

Which of the following would not shift the labor-supply curve for the cranberry industry?

an increase in the price of cranberries
a decrease in the wages paid to workers in the strawberry industry
a change in worker tastes that causes women to supply more labor to the labor market
an increase in immigration

Question 36

Studies of sports teams suggest that customer discrimination may

be reflected in the prices of old baseball cards.
have been present in Major League Baseball in the 1960s.
be present in the National Basketball Association.
All of these choices are correct.

Question 37

The price paid for any factor of production should equal the

average cost of production.
marginal revenue of the product sold by the firm.
value of the marginal product of the input.
price of the product sold by the firm.

Question 38

Which of the following statements is not an example of human capital?

Older, more experienced workers are paid more than younger, less experienced workers.
Law professors are paid less than practicing lawyers because their working conditions are more pleasant.
College graduates in developing countries earn substantially higher wages, on average, than workers with only a high school degree.
Graduates of higher-ranked MBA programs earn more than graduates of lower-ranked MBA program.

Question 39

A monopoly sells a higher quantity and charges a higher price than a competitive market.

True
False

Question 40

The change in consumption that results when a price change moves the consumer to a higher or lower indifference curve is called the

income effect.
indifference effect.
price effect.
substitution effect.

Question 41

The long-run equilibrium for firms in a monopolistically-competitive market is characterized by

prices equal to average total costs.
negative profits.
prices equal to average variable costs.
positive profits.

Question 42

Jumbo Jet Airways charges customers a lower fare for an airline ticket from Chicago to New York City if the customer purchases the ticket online rather than calling JumboJet Airways customer service agents. This is an example of

monopoly pricing.
deadweight loss.
arbitrage.
price discrimination.

Question 43

The political philosophy according to which the government should choose policies to maximize the total well-being of everyone in society is called

libertarianism.
Keynesianism.
utilitarianism.
liberalism.

Question 44

If firms in monopolistic competition are enjoying positive economic profits, in the long run this will attract new firms into the industry, causing prices for fall and profits to disappear.

True
False

Question 45

Many antipoverty programs have the unintended consequence of

increasing employment through minimum-wage laws.
discouraging work.
encouraging addictions through food stamps.
lowering family incomes through the negative income tax.

Question 46

Suppose that canned spaghetti is an inferior good. A decrease in income will decrease the optimal consumption of canned spaghetti.

True
False

Question 47

A monopoly must earn zero economic profit in the long run.

True
False

Question 48

A cartel most closely resembles the market structure of

monopolistic competition.
monopoly.
perfect competition.
Nashopoly.

Question 49

In-kind transfers complicate the measurement of inequality.

True
False

Question 50

For a Giffen good, the income effect

is stronger than the substitution effect.
results in a very steep, downward-sloping demand curve.
and the substitution effect move in the same direction.
exactly equals the substitution effect.