market A in economics is a group of products a. that are close substitutes. b. that are complements. c. produced by the same firm. d. produced with the same inputs. e. with similar names. If cross elasticity between Coke and Pepsi is infinite, this implies a. the two colas are perfect substitutes. b. the two colas are perfect complements. c. the two colas are close but not perfect substitutes. d. consumers would not switch to one good when the price of the other increases. e. these two goods are not related. Entry is easiest if a market is a. monopolistically competitive. b. a monopoly. c. an oligopoly. d. perfectly competitive. Suppose Electronics Inc. is the only firm producing a new type of CD player. If more firms enter the market, the demand curve observed by Electronics Inc. a. shifts to the right and becomes less elastic. b. shifts to the right and becomes more elastic. c. shifts to the left and becomes less elastic. d. shifts to the left and becomes more elastic. A monopolist's market share is a. 100 percent. b. 80 percent. c. 60 percent. d. 40 percent. e. zero. When all producers of a product have a market share that is very close to zero, they a. will go out of business in the long run. b. are each producing output close to zero. c. are operating in a perfectly competitive market. d. are an oligopoly.
e. should raise the price to make more profits. The market demand for a perfectly competitive industry is a. perfectly horizontal at the level of market price. b. perfectly vertical at the level of market price. c. upward sloping. d. downward sloping. The firm demand curve observed by a firm in a perfectly competitive industry is __________ while that observed by a monopolist is ____________. a. horizontal; downward sloping b. horizontal; horizontal c. downward sloping; horizontal d. downward sloping; downward sloping The market demand for a monopolistically competitive industry is a. perfectly horizontal at the level of market price. b. identical to that observed by the firm. c. downward sloping. d. a and b. e. b and c. Which of the following is a characteristic of an oligopoly? a. It is easy for new firms to enter the market. b. Price changes by one firm affect the pricing behavior of other firms in the market. c. There are a large number of very small firms. d. Individual firms in the market have insignificant market share. The government claims that Electronics Inc. is a monopolist. Which of the following would support its claim? a. Other firms can easily enter Electronics Inc.'s market. b. Electronics Inc. is a large firm. c. Electronics Inc. has exclusive access to the inputs necessary to produce the good in its market. d. Other firms produce close substitutes for Electronics Inc.'s products.
In which market structure does an individual firm not have influence over price? a. oligopoly b. monopoly c. perfect competition d. monopolistic competition e. There is no market structure in which individual firms have influence over their price. Monopoly rights to be the only producer of a product may be legally awarded in order to a. encourage profit making. b. guarantee high prices. c. encourage competition. d. encourage entry into the market. e. encourage research. Barriers to entry in a perfectly competitive industry are a. nonexistent. b. present, but easily overcome. c. higher than in monopolistic competition. d. created by patents and economies of scale. e. financial, when there are high start-up costs. For a firm to be a natural monopoly, a. fixed costs must be high. b. demand must be insufficient to support more than one firm. c. splitting the firm would raise average total costs. d. all of the above. Total economic profits equal a. marginal revenue minus explicit and implicit marginal cost. b. total revenue minus total explicit costs. c. total revenue minus total explicit and implicit costs. d. none of the above. When we say that a firm earns "normal profits," we mean a. marginal revenue minus explicit and implicit marginal costs is greater than zero.
b. total revenue minus total explicit costs equals zero. c. total revenue minus total explicit and implicit costs is greater than zero. d. total revenue minus total explicit and implicit equals zero. Figure 1 shows the cost and demand curves for a monopolistic competitor. If the firm chooses the optimal level of output, it will a. earn zero profits. b. earn positive profits. c. lose money. d. We are not given sufficient information to say. Figure a. b. c. d. In the a. b. c. d. In the a. b. cost. c. d. e. In the a. b. c. d. e. 1 therefore depicts a monopolistic competitor who is a near monopolist. in the long run. in the short run. none of the above. long run, a monopolistic competitor will face a downward sloping demand curve. will earn zero profits. will have a demand curve that is tangent to the ATC. all of the above. long run, a firm in a perfectly competitive market will have positive fixed costs. will produce at the level of output with the lowest will earn positive profits. all of the above. none of the above. long run, a monopolistically competitive firm will have positive fixed costs. produce at the level of output with the lowest cost. earn positive profits. all of the above. none of the above.
Gadgets Inc. is a perfectly competitive manufacturer of mousetraps in Freedonia, a country that does not grant
patents for new inventions. Suppose Gadgets Inc. invents a better, cheaper mousetrap. In the long run, a. other firms will adopt the invention. b. Gadgets Inc. will earn positive economic profits from its invention. c. Gadgets Inc.will become a monopolist. d. Gadgets Inc. will become a price maker in the Freedonian mousetrap market. For a firm in a perfectly competitive market, marginal revenue is a. less than price. b. greater than price. c. equal to price. d. We do not know enough to know. For a monopolist, marginal revenue is a. less than price. b. greater than price. c. equal to price. d. We do not know enough to know. Compared to a perfectly competitive firm with the same cost structure, a monopoly will charge a a. higher price and sell more. b. lower price and sell more. c. higher price and sell less. d. lower price and sell less. e. similar price and sell the same quantity. In the a. b. c. d. e. long run, a monopoly will earn positive profits. zero profits. lower profits than a monopolistic competitor. a and c. b and c.
In the long run, a firm in a monopolistically competitive market is a. more efficient than if it were a perfectly competitive firm. b. less efficient than if it were a perfectly competitive.
c. equally efficient as if it were a perfectly competitive firm. d. none of the above. Schumpeter's hypothesis says that a. a monopoly always charges a higher price than if the same market were competitive. b. a monopoly may charge a lower price than if the same market were competitive. c. monopolistically competitive firms always become monopolies. d. there is no such thing as a perfectly competitive market in the real world. Electronics Inc. is a monopolistic competitor and is earning positive economic profits. In the long run, other firms will enter the market, a. and Electronics Inc.'s profits will drop to zero. b. but Electronics Inc.'s profits will remain positive. c. and the demand curve observed by Electronics Inc. will become steeper. d. and the demand curve observed by Electronics Inc. will shift to the right. If there is a horizontal merger in the industry, we would expect a. the four firm concentration ratio to increase. b. the four firm concentration ratio to stay the same. c. the four firm concentration ratio to decrease. d. the Herfindahl-Hirschman ratio to decrease. If there is a vertical merger in the industry, we would expect a. the four firm concentration ratio to increase. b. the Herfindahl-Hirschman ratio to increase. c. the four firm concentration ratio to decrease. d. the Herfindahl-Hirschman ratio to decrease. e. none of the above. If a market is an unbalanced oligopoly, a. the Herfindahl-Hirschman ratio will be smaller than in a balanced oligopoly. b. sales will be relatively equally distributed among the firms.
c. the largest firms may be able to force other firms to follow them on price and output decisions. d. all firms will have the same market power. Firm A makes bicycles and Firm B makes chewing gum. If A and B decide to merge, it will be an example of a a. vertical merger. b. horizontal merger. c. conglomerate merger. d. multinational merger. The CEOs of two firms producing the same good have a secret meeting where they decide who will sell how much and the price each will charge. This is an example of a. a horizontal merger. b. a conglomerate merger. c. a vertical merger. d. collusion. Cartels... a. are very stable over time. b. give firms more market power than if they were not members of a cartel. c. allow firms to charge a higher price than if they merged and became a monopoly. d. exist in theory but are never observed in the world. e. form only when concentration ratios are low. The game theory view of oligopoly pricing a. does not take into account the probable reaction of other firms when one firm changes its price. b. says that firms react only to the demand and cost structure they face. c. explains the behavior of a monopoly better than it explains the behavior of firms in an oligopolistic market. d. emphasizes the interdependence of firms in an oligopoly. Godfather pricing is more likely if a. one firm has much more market power than the other firms. b. the oligopoly is balanced. c. the Herfindahl-Hirschman index is greater than the four firm ratio.
d. the four firm ratio is greater than the HerfindahlHirschman index. Price discrimination refers to the practice of a. charging a higher price than would be charged in perfect competition. b. charging a different price to different segments of the market. c. following an industry leader's decisions regarding price and output. d. basing a pricing decision on what your competitors are doing.
Cartels tend to be unstable because a. the firms in the cartel earned higher profits before they joined it. b. the members of a cartel have an incentive to "cheat" and produce more than their allotted quantity. c. the concentration ratio will fall after the formation of the cartel. d. if the firms leave the cartel they can jointly behave like a monopolist. Oligopoly a. is rare in the United States. b. is rare world-wide. c. occurs in only a few industries. d. is less common than perfect competition. Under oligopoly, production will be _______ than it would be in perfect competition and the price will be _______. a. higher; lower b. higher; higher c. lower; higher d. lower; lower Market a. b. c. d. power refers to the firm's ability to decide what products it wants to produce. influence congress by donating funds to campaigns. select and control market price and output. merge with the supplier of one of its inputs.
As the concentration in an industry increases, we would expect a. prices to rise above the competitive prices. b. firms to have less market power. c. an increase in the gap between the price charged and the price a monopoly. d. cartels to become less likely. Concentration ratios are good indicators of market power. Sometimes they will overstate it because a. they cannot reflect the concentration of power in an unbalanced oligopoly. b. they do not include sales of producers of similar goods. c. market concentration has little impact on market power. d. none of the above. Concentration ratios are a perfect indicator of market power. The government can deal with monopoly through a. nationalization. b. regulation. c. laissez-fair policy. d. all of the above. The theory of creative destruction a. is a reason why the government might pursue a laissez-fair policy. b. says that once a firm is a monopoly, it will destroy all its competitors. c. says that average cost pricing will remove incentives for firms to keep costs down. d. was the foundation for the Clayton Antitrust Act. According to the theory of countervailing power, a. firms should not be nationalized because the government has no incentives to keep losses down. b. monopoly power is moderated by the potential threat of firms entering the market. c. the market power of one economic bloc is moderated by the power of other economic blocs. d. monopoly power to control prices can only be moderated by government regulation.
Which of the following is NOT a reason the government might allow a firm to be the monopoly producer of a particular good? a. There are decreasing returns to scale in the production of the good. b. The firm is a natural monopoly. c. Firms are more likely to develop new products if they can be the sole producer for a period of time. d. According to the theory of creative destruction, other firms will eventually eliminate the firm's monopoly power. Which of the following industries has NOT been deregulated in the past 20 years? a. the telephone industry b. the airline industry c. the electric power industry d. the clothing industry If the government imposes natural monopoly, a. the firm will have b. the firm will lose it receives a subsidy. c. consumers will not they receive subsidies. d. the firm will earn If the government imposes monopoly, a. the firm will have b. the firm will lose it receives subsidies. c. consumers will not they receive subsidies. d. the firm will earn marginal cost pricing on a no incentive to keep losses down. money at the imposed price unless buy at the imposed price unless positive economic profits. average cost pricing on a natural no incentive to keep losses down. money at the imposed price unless buy at the imposed price unless positive economic profits.
According to the theory of contestable markets, a. firms should not be nationalized because the government has no incentives to keep losses down. b. monopoly power is moderated by the potential threat of firms entering the market.
c. the market power of one economic bloc is moderated by the power of other economic blocs. d. the firm's power to control prices can only be moderated by government regulation. Which of the following is not AUTOMATICALLY illegal under U.S. antitrust legislation? a. charging lower prices in one market than in another in order to eliminate competition b. attempting to monopolize an industry c. forcing customers to sign exclusive contracts in which they agree not to buy from competitors d. merging with another company which supplies an input in production
Under the rule of reason, a. a firm's size is sufficient reason to rule against it in an antitrust suit. b. nationalization should be the government policy of last resort. c. a firm's size alone is insufficient reason to rule against it in an antitrust suit. d. a high Herfindahl index is sufficient proof of monopoly power in antitrust suits. Under the per se criterion, a. a firm size is sufficient reason to rule against it in an antitrust suit. b. nationalization should be the government policy of last resort. c. a firm's size alone is insufficient reason to rule against it in an antitrust suit. d. the government must demonstrate that a firm has attempted "restraint of trade." In its antitrust suit against Microsoft, the government showed that the firm had nearly 100% of the business in its industry. This fact would be sufficient to win the case under the
a. b. c. d.
rule of reason criterion. per se criterion. theory of creative destruction. theory of countervailing power.
The Acme Electronics Company, the largest manufacturer in the industry, required retailers selling its video games to stop selling its competitors' products. Which of the following describes Acme's behavior? a. Acme used price discrimination to drive out its competition. b. Acme used an exclusive contract to eliminate competition. c. Acme attempted to form a cartel. d. Acme engaged in godfather pricing. e. Acme engaged in collusion. In Figure 1, if the government forced the firm to sell 80,000 units, it would be applying a. marginal cost pricing. b. a "fair" price. c. average cost pricing. d. a laissez-faire policy. In Figure 1, the government forces the firm to charge a "fair" price. At this price, the firm sells 140,000 units and will earn _______ profits. a. positive b. zero c. negative d. We do not know enough to say. An externality is a. a good whose benefits is not diminished even when additional people consume it. b. a good whose benefits cannot be withheld from anyone. c. the unintended cost or benefit that affects other people and results from economic activity. d. a cost which does not change with the level of production.
If my child is inoculated against the measles, the risk of all other children catching the measles is diminished. This is an example of a a. negative externality. b. positive externality. c. good with increasing marginal utility. If a family decides that the risk of its children getting the measles is low and the cost of an inoculation is high, a. it will decide to do what is socially optimal. b. it will spend more on inoculations than is socially optimal. c. it will spend less on inoculations than is socially optimal. Pork, Inc. decides to build a giant pig farm in Henry, IL, but having so many pigs in one place creates a terrible smell. This is an example of a. a negative externality. b. a positive externality. c. a public good. d. a good with increasing marginal utility. If Pork, Inc. were forced to install a methane collection system to filter out the offensive aromas, it would a. not change its production decisions. b. raise fewer pigs. c. raise more pigs. d. We do not know enough to predict the impact on the supply of pigs. If Pork Inc. is forced to install the methane scrubbers, the price of pork chops in the supermarket will probably a. increase. b. decrease. c. stay the same. d. We do not know enough to say. The government could deal with the "air pollution" created by Pork, Inc. by a. subsidizing the raising of pigs. b. taxing the pig production to finance public aroma control devices.
c. can be d. e.
creating a law that limits the number of pigs that raised on one farm. a and c. b and c.
Market failures create problems because a. people are really not capable of behaving rationally. b. markets will not reach the most efficient level of production. c. people tend to overestimate social costs. d. they are so rare that we do not know how to deal with them. Last year, everyone in my neighborhood was worried about crime, so we agreed as a group to raise money for extra street lights. The street lights are public goods because a. they have to be financed by a public organization. b. they exist in public. c. no one can be excluded from enjoying the benefit they create. d. we will have to get a public permit to buy them. When the money for the lights was collected, my neighbor Bob didn't contributed anything, we but made up the difference and bought the lights anyway. Bob is a a. cheapskate. b. free rider. c. person who does not make rational economic decisions. This year, someone in the neighborhood suggested that we raise money to plant flowers along the side of the road. Everyone agreed that flowers would be great, but no one has contributed any funds. This illustrates that a. private actions can always reach the socially optimal level of public goods. b. public goods will not be provided unless free riders are present. c. private actions may not reach the optimal outcome because economically rational people will always become free riders. d. public goods have a social benefit but no private benefit.
Which of the following is a near public good? a. national defense b. clean air c. a lighthouse d. the national highway system Because of externalities created by public goods, the government decides what and how much to provide. If people vote on how much to provide, a. they will never reach the socially efficient decision. b. they will always reach the socially efficient decision. c. sometimes they will reach the socially efficient decision but sometimes they will not. The fact that the government may not reach the socially efficient choice is the problem of a. market failure. b. antitrust policy. c. government failure. d. property rights. Government failure may result from a. the fact that only people who cannot get jobs elsewhere work for the government. b. the existence of special interest lobbies. c. the fact that government employees only take the public interest and never their personal interest into account. d. the fact that the government has no mechanisms for financing public goods efficiently. The marginal physical product of labor (MPP) is defined as d. the change in total output divided by the change in the number of workers employed. The marginal revenue product of labor is a. change in total revenue. b. change in total revenue minus the number of workers. c. MPP divided by the wage rate.
d. MPP times the wage rate. Acme Steel employs 4,000 people and produced 1,000,000 units of steel. If it adds 1,000 workers, its production increases to 1,500,000. The MPP of labor is a. 1,000. b. 500. c. 125. d. 100. If steel sells for $10 per unit, Acme's MRP is a. 10,000. b. 50. c. 510. d. 5,000. The demand for labor curve is the ______ curve. a. MPP b. MLC c. MRP d. TLC Equilibrium in the labor market is determined by the intersection of the ______ and the _______ curves. a. MPP and MLC b. MRP and MLC c. TLC and MLC d. TLC and MRP The Acme Computer company invents a process that makes it cheaper to manufacture computer chips. This will a. shift the MLC curve to the right. b. shift the MPP curve to the right. c. shift the MPP curve to the left. d. shift the MRP curve to the left.
If all computer manufacturers adopt Acme's new technology, the equilibrium wage rate in the computer industry will a. increase. b. decrease. c. stay the same. d. We do not know enough to say.
Acme builds a new factory in a New England fishing village. We would expect the supply curve for laborers in the fishing industry to a. become steeper. b. become flatter. c. shift to the right. d. shift to the left. Suppose consumers feel they have all the computers they need so the price of a computer falls. We would expect the demand curve for workers in the computer industry to a. become steeper. b. become flatter. c. shift to the right. d. shift to the left. The fact that at high wages, workers may supply less labor is referred to as a. the efficiency wage theory. b. the backward bending supply curve. c. the Gastarbeiter problem. d. the minimum wage. Suppose the average wage in the country of Freedonia has always been higher than the average wage in neighboring countries. This could be explained by the fact that a. it is very easy to legally immigrate to Freedonia. b. the average worker in the neighboring countries has a higher skill level than the average worker in Freedonia. c. goods manufactured in Freedonia tend to have a higher price than goods manufactured in its neighbors. d. the neighboring countries have a higher technology level. Firms may pay their workers a wage higher than the equilibrium wage rate because a. it will lower labor turnover. b. it will lower the MLC. c. it will eliminate entry from noncompeting labor markets. d. it will shift the labor supply curve.
The fact that sometimes firms pay their workers more than the market rate is referred to as a. the efficiency wage theory. b. the backward bending supply curve. c. the Gastarbeiter problem. d. the minimum wage. The market supply of labor is _______ ; an individual firm faces a ________ labor supply curve. a. upward sloping; upward sloping b. upward sloping; downward sloping c. flat; upward sloping d. upward sloping; flat Acme Oil hires workers in a monopsonistic labor market. As a consequence, Acme's firm-level labor supply curve is _______ while the market labor supply curve is ________. a. upward sloping; upward sloping b. upward sloping; flat c. flat; upward sloping d. flat; flat Acme's a. b. c. d. MLC curve is __________ the labor supply curve. identical to above below We do not know enough to say.
As a monopsonist, Acme determines its profit maximizing number of workers by determining the number where a. MRP = MLC b. MRP = w c. MLC= w d. MRP = TLC
The equilibrium level of labor is _______ under monopsony than in a competitive labor market. a. higher b. lower c. the same d. We do not know enough to say.
The equilibrium wage is ______ under monopsony than in a competitive labor market. a. higher b. lower c. the same d. We do not know enough to say. When a labor union and an employer negotiated over the wages, hours worked and working conditions at the firm, this process is called a. a yellow dog contract. b. a closed shop. c. a union shop. d. collective bargaining. If the Acme employees organize into a union which conducts collective bargaining, Acme will face a ________ labor supply curve. a. upward sloping b. vertical c. horizontal d. downward sloping If the Acme employees union wins a higher wage in their negotiation than Acme would have paid without the union, the firm will face a. an excess supply of labor at that wage. b. a shortage of workers at that wage. c. an excess demand for workers at that wage. d. a shortage of skilled workers. To maintain the negotiated wage, the Acme employee union will have to control the supply of labor. It can legally do this by a. telling the firm how many people it can hire. b. forcing the firm to only hire union members. c. requiring new employees to join the union so that they must receive the negotiated wage. d. telling the firm the level of output it can produce. A ____ union represents all members of an occupation while a _______ union represents all workers in an industry. a. closed shop; industrial
b. open shop; industrial c. craft; open shop d. craft; industrial The Wagner Act of 1935 created an organization to investigate claims of unfair labor practices. This organization is called a. The National Labor Relations Board. b. the AFL-CIO. c. the American Federation of Labor. d. none of the above. The government believes such an organization would violate anti-trust laws. Which of the following activities would be LEGAL activities for a labor union? a. striking in support of the strike of another union b. organizing a vote on whether or not to unionize in a non-union workplace c. forcing the firm to hire only union employees d. pressuring employees to join the union Which of the following activities would be LEGAL for a firm? a. firing any employee who joins the union b. hiring a non-union employee c. refusing to bargain with a recognized union d. forcing new employees to agree that they will never vote for a union From 1900 to 1960, the percentage of workers in unions _____. From 1960 to 1990, the percentage of workers in unions _____. a. decreased; stayed the same b. increased; stayed the same c. decreased; increased d. increased; decreased Capital equipment is a. the money that firms invest in production. b. the machinery a firm uses in production. c. the money which is invested rather than used to finance consumption. d. the increase in output from adding another machine.
The price of loanable funds is a. the present value of the revenue from the investment. b. the marginal revenue product of capital. c. the marginal physical product of capital. d. the interest rate. The marginal revenue product of capital is a. the interest rate. b. the change in total revenue from adding a dollar of loanable funds minus the change in revenue from adding capital equipment. c. the change in total revenue from adding one more dollar of loanable funds to production. d. the marginal revenue product of capital times the interest rate. The demand curve for loanable funds is downward sloping because a. a higher interest rate means a lower present value. b. the law of diminishing returns applies to investment in capital equipment. c. the marginal factor cost is increasing. d. the marginal physical product of capital is increasing. Firms will add capital equipment as long as a. the marginal revenue product of loanable funds is greater than the interest rate. b. the present value of the investment is less than the interest rate. c. the marginal revenue product of capital is less than the interest rate. d. the marginal revenue product of loanable funds is greater than the marginal revenue product of capital equipment. The supply of curve of loanable funds is upward sloping because a. people are willing to save more if the interest rate is high. b. the present value of an asset decreases as the interest rate increases. c. the MPP of loanable funds is downward sloping.
d. the MPP of loanable funds is upward sloping. The present value of an asset is a. the value today of the expected future stream of income from an asset. b. the MRP of an asset. c. the current value of an asset we bought years ago. d. the interest rate. The formula a. PV = b. PV = c. PV = d. PV = for the present value of an asset is r. rR. R/r. r/R.
As the interest rate increase, the present value of our expected stream of income from an asset a. increases. b. decreases. c. stays the same. d. We do not know enough to say. "Rent" is defined as a. the cost of land. b. the cost of bringing land into production. c. the difference between the cost of bringing land into production and the price we can sell it for. d. the MRP of a unit of land. Farmer Brown buys a piece of unimproved land. It costs him $300 per acre to prepare it for agricultural use. If he then sells it for $500 an acre he earns $200 per acre in a. profits. b. interest. c. rent. d. opportunity cost. Farmer Jones also improves a patch of land, but his land has hills and more trees so it costs him $400 to get it ready for production. The fact that Farmer Brown has a margin of $200 per acre and Farmer Jones has a margin of $100 per acre is called a. land rent. b. location rent
c. differential rent. d. opportunity cost. Apartments across the street from Wrigley Field in Chicago are very expensive because people can watch the baseball games from their windows. This is an example of a. land rent. b. location rent. c. differential rent. d. opportunity cost. Wage rent is a. the difference between the cost of a education and the wage he receives. b. the difference between what a person willing to work for and what he receives. c. the difference between the wage that the same profession receive. d. the difference between the wage that two different professions receive.
person's would be two people in two people in
The income that entrepreneurs receive to compensate them for their risk is called a. opportunity cost. b. rent. c. profit. d. interest. The bottom 20% of the income distribution are called the a. lowest decile. b. lowest quartile. c. median. d. lowest quintile. The Lorenz a. the b. the quintile. c. the considered d. the curve shows total income earned by each quintile. percentage of total income that earned by each level of income below which families are to be poor. Gini coefficient at each level of income.
If Freedonia achieves complete income equality, its Lorenz curve a. will be along the horizontal axis. b. will be along the vertical axis. d. will be along the diagonal. If a country's Lorenz curve has shifted over time from below the diagonal to above the diagonal, its income distribution a. has improved. b. has gotten worse. c. has not changed. d. none of the above. Such a shift is impossible. In Figure 1, we can see that a. France's distribution of income is more equal than Sweden's. b. France's distribution of income is more equal than Brazil's. c. The U.S. income distribution is more equal than that of Sweden. d. Brazil has the most equal income distribution. The Gini coefficient is a. the percentage of the population that is below the poverty threshold. b. a numerical measure of how the income distribution has changed over time. c. a numerical measure of the degree of income inequality. d. the percentage of the population earning the minimum wage. Based on Figure coefficient? a. A / B b. A / (A c. A / (A + d. A / (1 2, how do we calculate the Gini B) B) B)
If Freedonia's income distribution is more equal than that of the neighboring country of Ecotopia, then Freedonia's Gini coefficient a. is less than Ecotopia's.
b. Freedonia's Gini Ecotopia's is negative. c. Freedonia's Gini Ecotopia's is less than d. Freedonia's Gini Ecotopia's.
coefficient is positive and coefficient is greater than one and one. coefficient is greater than
Between 1970 and 1999, the U.S. income distribution has a. become more equal. b. become less equal. c. has not changed. The U.S. distribution of wealth is a. more equal than the distribution of income. b. less equal than the distribution of income. c. equal to the distribution of income. On the average, the Gini coefficient in less developed countries is a. lower than that in developed countries. b. higher than that of developed countries. c. equal to that of developed countries. The percentage of persons below the poverty line in 1997 is _____ than it was in 1960 and _______ than it was in 1980. a. lower; lower b. lower; higher c. higher; lower d. higher; higher Some people believe that we should not try to reduce income inequality because a. inequality in income distribution will maximize social utility. b. access to income is distributed by chance. c. people will not have incentives to work as hard if they are not allowed to keep all the rewards. d. the Gini coefficient is so inaccurate that we do not know the degree of income inequality. Other people argue that we should try to reduce income inequality. Which of the following is NOT an argument that they would use?
a. Economic opportunities are distributed in a random manner. b. Economic opportunities are distributed in a manner that is not random, but is still unfair. c. If we allow income inequality, then wealthy people will have a higher marginal utility. d. Retaining income inequality will maximize social utility. Food stamps are a form of a. cash assistance. b. in-kind assistance. c. negative income tax. d. minimum wage.
FOR QUESTIONS 1-5: Ecotopia and Freedonia have the same resource base and straight line Production Possibilities Curves but different production technologies. If Ecotopia devotes all its resources to widgets, it can produce 600 widgets and no corn; if it devotes all its resources to corn, it produces no widgets and 200 bushels of corn. If Freedonia devotes all its resources to widgets, it can produce 300 widgets and no corn ; if it devotes all its resources to corn, it produces no widgets and 400 bushels of corn. (Hint: draw the Production Possibility Curves.) Ecotopia has a. a comparative advantage in widgets. b. an absolute advantage in widgets. c. both an absolute and a comparative advantage in widgets. d. no advantage in widgets. Freedonia has a. a comparative advantage in widgets. b. an absolute advantage in widgets. c. both an absolute and a comparative advantage in widgets. d. no advantage in widgets.
Ecotopia has a. a comparative advantage in corn. b. an absolute advantage in corn. c. both an absolute and a comparative advantage in corn. d. no advantage in corn. Freedonia has a. a comparative advantage in corn. b. an absolute advantage in corn. c. both an absolute and comparative advantage in corn. d. no advantage in corn. Based on questions 1-4, b. Freedonia should specialize in corn and Ecotopia should specialize in widgets. c. both countries should produce both corn and widgets. FOR QUESTIONS 6-10: Once again, Freedonia and Ecotopia have the same resource base and straight line PPCs. Ecotopia can still produce 600 widgets and no corn or 200 bushels of corn and no widgets. However, now, if Freedonia devotes all its resources to widgets, it can produce 300 widgets and no corn; if it devotes all its resources to corn it produces 150 bushels of corn and no widgets. (Again, draw the picture.) Ecotopia has a. a comparative advantage in widgets. b. an absolute advantage in widgets. c. both an absolute and comparative advantage in widgets. d. no advantage in widgets. Freedonia has a. a comparative advantage in widgets. b. an absolute advantage in widgets. c. both an absolute and comparative advantage in widgets. d. no advantage in widgets.
Ecotopia has a. a comparative advantage in corn. b. an absolute advantage in corn. c. both an absolute and comparative advantage in corn. d. no advantage in corn. Freedonia has a. a comparative advantage in corn. b. an absolute advantage in corn. c. both an absolute and comparative advantage in corn. d. no advantage in corn. Based on questions 6-9, a. Freedonia should specialize in widgets, and Ecotopia should specialize in corn. b. Freedonia should specialize in corn, and Ecotopia should specialize in widgets. c. it does not matter who produces what. The terms of trade is a. the index of import prices minus the index of export prices. b. the index of export prices minus the index of import prices. c. the index of export prices divided by the index of import prices. d. the volume of exports divided by the volume of imports. On the whole, the terms of trade faced by Less Developed Countries (LDCs) has a. increased. b. decreased. c. stayed largely the same. The most important trading partner of the U.S. is a. Britain. b. Canada. c. Germany. d. Japan. A tariff is a. a limit on the quantity of a good that can be imported.
b. a subsidy to exports. c. a subsidy to imports. d. a tax on imports. If the U.S. government imposes a tariff on the import of automobiles, there will be a. a decrease in the U.S. market price of automobiles. b. an increase in U.S. quantity of automobiles consumed in the U.S. c. a decrease in U.S. imports of automobiles. d. an increase in U.S. exports of automobiles.