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Economics Pre-Comp
Economics Pre-Comp
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Answers
1
When two countries are trading, which country should specialize in a particular good?
The country with a comparative advantage in that good
The richer country
The country with an absolute advantage in that good
The larger country
2
Consumer surplus refers to
The extra value sellers get from selling at a higher price
The extra value buyers get from selling at a higher price
The extra value buyers get from selling at a lower price
The extra value sellers get from selling at a lower price
3
Which characteristic competition prevents a monopoly?
Perfect information
Product differentiation
Many buyers
No barriers to enter
4
Total revenue - (Explicit costs + Oppurtunity cost) =
Average total cost
Total cost
Economic profit
Accounting profit
5
Which is an example of inputs that can adjust in the long run, but not the short run?
Amount of wood to make a desk
# of pickles on a sandwich
Amount of electricity used by a power plant
Size of a McDonald's restaurant
6
What is the utility maximizing condition?
P = MU
TR = TC
MR = MC
P = TU
7
The economic problem is
Scarcity
Poverty
Utility
Opportunity Cost
8
Which of the following is an example of a duopoly (oligopoly with two companies)?
Coke and Pepsi
Xfinity cable
Trucks and gasoline
Dolls and corn
9
In monopolistic competition, companies
Will not advertise
Waste resources on advertising
Use advertising to earn a long run profit
Use advertising to earn a short term profit
10
The thing Adam Smith made to describe market behavior
Trade
Marginal utility
Scarcity
Invisible hand
11
Companies is an oligopoly agreeing to restrict output to increase profit is called
Monopolization
Competition
Game theory
Collusion
12
AFC is the difference between
MC and ATC
MC and TFC
MC and AVC
ATC and AVC
13
Demand for paper clips is probably
Elastic: they're a luxury and lack substitutes
Inelastic: they're expensive and lack substitutes
Inelastic: they're cheap and lack substitutes
Elastic: they're expensive and lack substitutes
14
Interdependence in an oligopoly means
Firms makes differentiated products to their rivals
Firms face perfectly elastic demand
Firms consider actions of rivals when making decisions
Firms makes identical product to their rivals
15
If a buyer and a seller make a trade, which one is better off?
Seller
Neither
Buyer
Both
16
Good A and Good B are substitutes if a decrease in the price of A
increases demand for B
reduces quantity demanded for B
increase quantity demanded for B
reduces demand for B
17
Which market structure has the lowest costs for buyers?
Monopolistic competition
Perfect competition
Monopoly
Oligopoly
18
What would you expect to see in a country WITHOUT property rights?
The free market would fail
People will respect each other's property
A market economy would always succeed
The incentive problem in command economies would be solved
19
Which of the following could cause the PPC to shift outward?
Switch to a command economy
The country goes to war
A new technological development
People build more machinery
20
The elasticity of a unit elastic good is
0
Infinity
1
2
21
If a price increase of 10% makes quantity demanded fall by 5%, what is the good's elasticity?
Perfectly elastic
Perfectly inelastic
Elastic
Inelastic
22
Why is the PPC curved rather than straight?
Opportunity cost is the same as you make more of a good
Because of diminishing marginal utility
It's always straight
Resource become less useful as you make more of a good
23
For a car company, which of the following are variable costs?
Steel to make the car
Renting the factory used for production
The cost of paying each worker for their work
Cost of electricity running the machines
24
All of the following are included in the opportunity cost of going to college EXCEPT
Wages the student gave up to attend college
The cost of food for 4 years
The cost of textbooks
The cost of college tuition
25
In an oligopoly, firms
Cannot earn profits
Are price takers
Are numerous
Are independent
26
How much will a monopoly produce relative to the efficient market equilibrium?
Impossible to tell
Less
More
The same
27
The gasoline market is in equilibrium. Which of the following would decrease the price?
Incomes rise
The price of bus/subway tickets rise
The price of cars
The price of crude oil (an input for gasoline) rises
28
Demand for reusable water bottles if people start caring about the environment:
Demand will decrease
Demand will not change
Demand will increase
29
A law is passed that says that salt must be sold for 3.00/lb or more. This is
A supply shift
A price floor
A price ceiling
A demand shift
30
A store can sell 2 shirts for $20 each or 3 for $18 each. At 3 sold, what is MR?
14
54
20
18
31
A country producing on their PPC has a _________ allocation of resources
efficient
inefficient
impossible
scarce
32
What is the profit maximizing condition?
P = TC
MR = MC
P = MU
TR = TC
33
A price ceiling in imposed on gas. What could happen?
Service at gas station will get worse
Gas stations will charge higher prices
People will have to wait in line to get gas
Poor people will be able to get gas more easily
34
If the price of concrete rises, how would the market for concrete roads be affected?
Demand would increase
Demand would decrease
Supply would decrease
Supply would increase
35
What are two assumptions we make about consumers?
People are irrational and love money
People are rational and maximize utility
People are irrational and maximize utility
People are rational and minimize utility
36
An organization that uses factors of production to produce a good or service is a
Oligopoly
Monopoly
Buyer
Firm
37
Any of the following could shift the supply curve except
War
Preferences
Changes in resource costs
New technologies
38
Demand for electricity if the price of electricity falls:
Demand will increase
Demand will decrease
Demand will not change
39
What is consumer surplus?
MU + P
Difference between MU + TU
Difference between willingness to buy and price
40
Which of the following could decrease the equilibrium price of oranges?
Orange production is down this year
Orange companies launch a successful ad campaign
New studies show that oranges can causes cancer
The price of apples (substitute) goes up
41
An accountant working on spreadsheets is an example of
Capital
Entrepreneurship
Land
Labor
42
An increase in the price of gas will shift demand for electric cars to the
Right and increase price of electric cars
Left and increase the price of electric cars
Right and reduce the price for electric cars
Left and lower price for electric cars
43
Which of the following equations is correct?
TC = TVC + MC
MC = ΔQ/ΔTC
ATC = TC/Q
AVC = Q/TVC
44
Which of the following are barriers to entry?
Undifferentiated products
Economies of scale
Patents
Trademarks
45
A country specializes in producing a good when they have
Rational behavior
A comparative advantage
An absolute advantage
Diminishing marginal returns
46
What is the cost of a product?
The value of the product
The quantity of resources used to produce it
The amount of money paid for it
What you gave up to get it
47
What is the fundamental economic problem?
Limited resources, unlimited possibilities
Governments with too much power become dictatorships
Taxes make the world a worse place
Individuals are actually irrational
48
Which market structure are price makers?
Monopoly
Oligopoly
Perfect competition
Monopolistic competition
49
If a company doubles its production and halves its average cost, it is facing
Diminishing marginal returns
Economies of scale
Diseconomies of scale
Constant returns to scale
50
If TC increases, what can we say about MC at that point?
It's not affected
It is increasing
We can't say for sure, but probably increasing
It is decreasing
51
The demand for peaches rises. Which of the following could NOT be a reason for the shift?
The price of apples rises
People have more money to spend
The price of peaches falls
Peach pie becomes more popular
52
Which of the following is likely to have the highest price elasticity of demand?
Foreign travel
Eggs
Water
Gasoline
53
Which of the following statements are true about a market economy?
The government allocates resources
Buyers and sellers choose to exchange goods
Sellers use prices to determine what they should do
The invisible hand describes market economies
54
Which sort of markets tends to lead to a monopoly?
Markets with identical products
Markets with cheap and easy to produce products
Markets with high fixed/start-up cost
Markets with perfect information
55
Professional athletes generally shouldn't mow their own lawns. This is an example of
Scarcity
The Law of Demand
Comparative advantage
Utility
