81.Inthe long run, a.competitivefirms’profitsarezero. b.competitivefirms’variablecostsarezero. c.competitivefirms’ATCcurvesshiftupwardordownwardtoensurethatalldemandissatisfied. d.thenumberoffirmsinthemarketisfixed. 82.RefertoFigure14-13.Ifthepriceis$6intheshortrun,whatwillhappeninthelongrun? a.Nothing.Thepriceisconsistentwithzeroeconomicprofits,sothereisnoincentiveforfirmstoenterorexittheindustry. b.Individualfirmswillearnpositiveeconomicprofitsintheshortrun,whichwillenticeotherfirmstoentertheindustry. c.Individualfirmswillearnnegativeeconomicprofitsintheshortrun,whichwillcausesomefirmstoexittheindustry. d.Becausethepriceisbelowthefirm’saveragevariablecosts,thefirmswillshutdown. 83.RefertoFigure14-13.Ifthepriceis$4.50intheshortrun,whatwillhappeninthelongrun? a.Nothing.Thepriceisconsistentwithzeroeconomicprofits,sothereisnoincentiveforfirmstoenterorexittheindustry. b.Individualfirmswillearnpositiveeconomicprofitsintheshortrun,whichwillenticeotherfirmstoentertheindustry. c.Individualfirmswillearnnegativeeconomicprofitsintheshortrun,whichwillcausesomefirmstoexittheindustry. d.Becausethepriceisbelowthefirm’saveragevariablecosts,thefirmswillshutdown. 84.RefertoFigure14-13.Ifthepriceis$3.50intheshortrun,whatwillhappeninthelongrun? a.Nothing.Thepriceisconsistentwithzeroeconomicprofits,sothereisnoincentiveforfirmstoenterorexittheindustry. b.Individualfirmswillearnpositiveeconomicprofitsintheshortrun,whichwillenticeotherfirmstoentertheindustry. c.Individualfirmswillearnnegativeeconomicprofitsintheshortrun,whichwillcausesomefirmstoexittheindustry. d.Becausethepriceisbelowthefirm’saveragevariablecosts,thefirmswillshutdown. 85.RefertoFigure14-13.Ifthepriceis$2intheshortrun,whatwillhappeninthelongrun? a.Nothing.Thepriceisconsistentwithzeroeconomicprofits,sothereisnoincentiveforfirmstoenterorexittheindustry. b.Individualfirmswillearnpositiveeconomicprofitsintheshortrun,whichwillenticeotherfirmstoentertheindustry. c.Individualfirmswillearnnegativeeconomicprofitsintheshortrun,whichwillcausesomefirmstoexittheindustry. d.Becausethepriceisbelowthefirm’saveragevariablecosts,thefirmswillshutdown. 86.Consideracompetitivemarketwithalargenumberofidenticalfirms.Thefirmsinthismarketdonotuseanyresourcesthatareavailableonlyinlimitedquantities.Inthismarket,anincreaseindemandwill a.increasepriceintheshortrunbutnotinthelongrun. b.increasepriceinthelongrunbutnotintheshortrun. c.increasepricebothintheshortandthelongrun. d.notaffectpriceineithertheshortorthelongrun. 87.Acompetitivemarketisinlong-runequilibrium.Ifdemanddecreases,wecanbecertainthatpricewill a.fallintheshortrun.Allfirmswillshutdown,andsomeofthemwillexittheindustry.Pricewillthenrisetoreachthenewlong-runequilibrium. b.fallintheshortrun.Nofirmswillshutdown,butsomeofthemwillexittheindustry.Pricewillthenrisetoreachthenewlong-runequilibrium. c.fall inthe shortrun.All, some,orno firmswillshut down,andsome ofthemwill exittheindustry. Pricewillthenrisetoreachthenewlong-runequilibrium. d.notfallintheshortrunbecausefirmswillexittomaintaintheprice. 88.Acompetitivemarketisinlong-runequilibrium.Ifdemandincreases,wecanbecertainthatpricewill a.riseintheshortrun.Somefirmswillentertheindustry.Pricewillthenrisetoreachthenewlong-runequilibrium. b.riseintheshortrun.Somefirmswillentertheindustry.Pricewillthenfalltoreachthenewlong-runequilibrium. c.fall inthe shortrun.All, some,orno firmswillshut down,andsome ofthemwill exittheindustry. Pricewillthenrisetoreachthenewlong-runequilibrium. d.notriseintheshortrunbecausefirmswillentertomaintaintheprice. 89.Inthetransitionfromtheshortruntothelongrun,thenumberoffirmsinacompetitiveindustryis a.fixed. b.increasingataconstantrate. c.decreasing. d.abletoadjusttomarketconditions. 90.Thelong-runsupplycurveforacompetitiveindustry […]

  11) The Taylor rule links the Federal Reserve’s target for the A) money supply to shifts in money demand. B) money supply to changes in interest rates. C) federal funds rate to economic variables. D) federal funds rate to the money supply. 12) Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________.  If the economy moves into a […]

  31.              Assume you are the manager of a department with a diverse work group, but white males comprise the largest subgroup. Many of the white males resent having to work alongside female and minority employees who have less seniority and work experience but are paid the same. Several conflicts and incidents have taken place between the white males and others that have disrupted the […]

  21) You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How […]

6.1   Labor Market Indicators   1) The Bureau of Labor Statistics (BLS) compiles information about employment by A) performing a census of every household in the nation. B) performing a quarterly survey 6,000,000 households. C) performing a monthly survey of 60,000 households. D) determining the average estimate of labor market specialists around the nation. E) contacting each of the 50 states’ Departments of Labor.   […]

    21) Which of the following is a normative economic statement? A) The price of milk is too high. B) The current high price of milk is the result of reduced worldwide supply. C) When the price of milk rises, the quantity of milk purchased falls. D) When the price of milk rises, the cost of milk-based products rises.   22) All of the […]

    1) If a mutual fund outperforms the market in one period, evidence suggests that this fund is A) highly likely to consistently outperform the market in subsequent periods due to its superior investment strategy. B) likely to under-perform the market in subsequent periods to average its overall returns. C) not likely to consistently outperform the market in subsequent periods. D) not likely to […]

  12.2   Information Problems in Insurance Markets   1) The idea of an insurance company “pooling” the risk means that A) the risk is completely eliminated from society. B) the insurance company requires buyers to pay a large deductible. C) the risk is spread over a large population. D) the insurance company insists on a pooling equilibrium. E) moral hazard and adverse selection are eliminated. […]

    72.Paradise Energy Company produces a product with a direct labor standard of 4.5 hours per unit at a rate of $13.50 per hour. During July 2,200 units were produced using 9,825 labor hours at an actual cost of $135,094. How much is the direct labor efficiency variance for July? A.$2,456 unfavorable B.$1,013 favorable C.$1,444 favorable D.$3,469 unfavorable   73.Electric Zero produces relay units […]

  61.Whennegativeexternalitiesarepresentinamarket, a.producerswillbeaffectedbutconsumerswillnot. b.producerswillsupplytoomuchoftheproduct. c.demandwillbetoohigh. d.themarketwillstillmaximizetotalbenefits. 62.Whichofthefollowingwouldnotbeconsideredanegativeexternality? a.Smelter,Inc.createssteelandpollution. b.Yourfriendbuysanewpuppythatbarkseverynight. c.Youhaveanadversereactiontoamedicationyourdoctorprescribedforyou. d.Yourneighborplaysloudmusicthatyoudislikethroughstereospeakerssetuponhisdeck. 63.Supposethatbeefproducerscreateanegativeexternality.Whatistherelationshipbetweentheequilibriumquantityofbeefandthesociallyoptimalquantityofbeef? a.Theyareequal. b.Theequilibriumquantityisgreaterthanthesociallyoptimalquantity. c.Theequilibriumquantityislessthanthesociallyoptimalquantity. d.Thereisnotenoughinformationtoanswerthequestion. 64.Supposethatcoalproducerscreateanegativeexternalityequalto$5pertonofcoal.Whatistherelationshipbetweentheequilibriumquantityofcoalandthesociallyoptimalquantityofcoal? a.Theyareequal. b.Theequilibriumquantityisgreaterthanthesociallyoptimalquantity. c.Theequilibriumquantityislessthanthesociallyoptimalquantity. d.Thereisnotenoughinformationtoanswerthequestion. 65.Supposethatsmokingcreatesanegativeexternality.Ifthegovernmentdoesnotinterfereinthecigarettemarket,then a.theequilibriumquantityofcigarettessmokedwillequalthesociallyoptimalquantityofcigarettessmoked. b.theequilibriumquantityofcigarettessmokedwillbegreaterthanthesociallyoptimalquantityofcigarettessmoked. c.theequilibriumquantityofcigarettessmokedwillbelessthanthesociallyoptimalquantityofcigarettessmoked. d.Thereisnotenoughinformationtoanswerthequestion. 66.Supposethatafirmproduceselectricitybyburningcoal.Theproductionprocesscreatesanegativeexternalityofairpollution.Ifthefirmdoesnotinternalizethecostoftheexternality,itwillproducewhere a.thevalueofelectricitytoconsumersequalstheprivatecostofproducingelectricity. b.thevalueofelectricitytoconsumersequalsthesocialcostofproducingelectricity. c.thecostoftheexternalityismaximized. d.thetransactioncostsofprivatebargainingareminimized. 67.SupposethatanegativeexternalityiscreatedbytheproductionofgoodX.Whichofthefollowingstatementsiscorrect? a.ThesocialcostofproducinggoodXincludestheprivatecostplusthecosttobystandersoftheexternality. b.Theincreasedsocialcostcanbegraphedasadecreaseindemand. c.Themarketequilibriumquantitywillbethesociallyoptimalquantityaslongasthegovernmentdoesnotinterfere. d.Bothaandbarecorrect. 68.WhichofthefollowingisNOTanexampleofanegativeexternality? a.airpollutionfromamanufacturingplant. b.disruptedsleepfromaneighbor’sloudmusic. c.anillnesscausedbysecondhandcigarettesmoke. d.adecreaseinyourpropertyvaluefromneglectingyourlawnandgarden. 69.Apaperplantproduceswaterpollutionduringtheproductionprocess.Ifthegovernmentforcestheplanttointernalizethenegativeexternality,thenthe a.supplycurveforpaperwouldshifttotheright. b.supplycurveforpaperwouldshifttotheleft. c.demandcurveforpaperwouldshifttotheright. d.demandcurveforpaperwouldshifttotheleft. Figure10-7 70.RefertoFigure10-7.Whichquantityrepresentsthesocialoptimumforthismarket? a.Q1. b.Q2. c.Q3. d.Q4.