Currently, XYZ Corporation can produce 50 units of output using 20 workers and 8 units of capital. Which of the following changes in the number of workers, units of capital, and quantity of output are consistent with constant returns to scale?

Workers: 40, Capital: 8, Output: 100

Workers: 40, Capital: 16, Output: 100

Workers: 20, Capital: 4, Output: 25

Workers: 10, Capital: 4, Output: 25

Workers: 10, Capital: 8, Output: 25

In monopolistic competition, an individual firm’s market power stems from which of the following?

The production of a differentiated product

Economies of scale in production

The absence of perfectly competitive firms that produce similar products

Barriers to entry allowing firms to earn economic profit

The maintenance of excess capacity to meet unexpected increase in demand

A profit-maximizing firm hires labor in a perfectly competitive market. Labor is the only variable input, and the marginal product of the last worker hired is 10 units per hour. If the hourly wage is $20, the firm’s marginal revenue

increases as more output is produced

increases first and then decreases as more output is produced

decreases first and then increases as more output is produced

Assume the demand curve for a good is perfectly inelastic and the production of each unit of this good generates external costs. A profit-maximizing firm producing the good in an unregulated free market will

generate deadweight loss because social cost is greater than marginal private cost.

generate deadweight loss only if marginal costs are constant

not generate deadweight loss because the equilibrium quantity is socially optimal

not generate deadweight loss unless marginal costs are constant

not generate deadweight loss unless fixed costs are zero

Assume that the government imposes a $4 per-unit tax on sellers of a good in the market described by the graph above. What are the price paid by buyers, the after-tax price received by sellers, and the deadweight loss?

Price Paid: $8, Price Received by Sellers: $6, Deadweight Loss: $100

Price Paid: $8, Price Received by Sellers: $4, Deadweight Loss: $200

Price Paid: $6, Price Received by Sellers: $4, Deadweight Loss: $0

Price Paid: $4, Price Received by Sellers: $8, Deadweight Loss: $100

Price Paid: $4, Price Received by Sellers: $8, Deadweight Loss: $200

Which of the following must be true if at the tenth unit of output, marginal cost (MC) is $130 and average total cost (ATC) is $150?

ATC of producing the ninth unit is less than $150.

ATC of producing the ninth unit is higher than $150.

MC of producing the ninth unit is higher than $130.

Average variable cost of producing the tenth unit is higher than $150.

Average variable cost of producing the tenth unit is equal to $20

Which of the following occurs as a result of the substitution effect of an increase in the price of a normal good?

The quantity demanded of the good decreases.

The demand for the good decreases.

The demand for the complementary good increases.

The demand for the good becomes more elastic.

The quantity demanded of the substitute good decreases.

Which of the following combinations of output, price, and economic profit is consistent for the profit-maximizing monopolist depicted in the graph above?

Output Q1, Price P1, Economic Profit 0P1LQ1

Output Q1, Price P4, Economic Profit P1P4IL

Output Q1, Price P4, Economic Profit P2P4IM

Output Q2, Price P3, Economic Profit P3P2NM

Output Q3, Price P1, Economic Profit P1P2ML

The two major newspapers in a city, Daily Voice and Town Herald, are considering whether to raise the subscription price. The first entries in the matrix above show the profits to Daily Voice, and the second entries show the profits to Town Herald. Which of the following is consistent with the above payoff matrix?

There are no dominant strategies in the above payoff matrix.

Do Not Change Subscription Price is a dominant strategy for Daily Voice.

Do Not Change Subscription Price is a dominant strategy for Town Herald.

Increase Subscription Price is a dominant strategy for Town Herald.

Increase Subscription Price is a dominant strategy for Daily Voice.

If a firm engages in perfect price discrimination, it charges:

each customer the highest price the customer is willing to pay

each customer the average cost of the product

each customer the lowest price the customer is willing to pay

different prices to customers based on how old they are

different prices to customers based on how many units of output they buy

Assume a perfectly competitive firm is currently producing 100 units of output. Its marginal cost is $6 and rising at that output quantity. Its average variable cost is $7 and its average fixed cost is $3. If the product's price is $6, which of the following will the firm do in the short run to maximize its profit?

Continue to produce at exactly 100 units of output

Produce, but less than 100 units of output

Produce more than 100 units of output

What is the marginal product of the third worker?

It cannot be determined from the information given.

The firm will maximize profit in the short run if it:

produces 85 units and the price is $10

shuts down and the price is $10

produces 30 units and the price is $4

produces 30 units and the price is $10

produces 54 units and the price is $4

The Lorenz curve represents the relationship between

the cumulative percentage of households and the cumulative percentage of income

income tax rates and income tax revenues

child labor rates and the poverty levels

income inequality and education level

market structure and the number of firms in the market

Antitrust laws are designed to maintain a competitive market environment by

making charging a price above marginal cost illegal

eliminating monopolies wherever they exist

preventing monopolies from generating negative externalities

limiting practices that increase a firm’s market power

imposing price ceilings on products produced by monopolies

The table above shows the opportunity costs of producing apples and oranges in Countries X and Y. Which of the following can be concluded based on the data given in the table?

Country X has a comparative advantage in producing both goods.

Country Y has an absolute advantage in producing both goods.

Country Y has a comparative advantage in producing both goods.

Country X has an absolute advantage in producing both goods.

Country Y has a comparative advantage in producing apples.

If a 10 percent increase in the price of good X results in a 20 percent decrease in the quantity of good Y demanded, which of the following is true?

Good X and good Y are complementary goods, and the cross-price elasticity is -2.

Good X and good Y are complementary goods, and the cross-price elasticity is -0.5.

Good X and good Y are substitute goods, and the income elasticity is +2.

Good X and good Y are normal goods, and the income elasticity is +2.

Good X and good Y are substitute goods, and the cross-price elasticity is -2.

Which of the following provides a possible explanation for a simultaneous increase in the equilibrium price and the quantity of blueberries in a market?

An increase in the price of farmland used to grow blueberries

An increase in the price of strawberries, a substitute

An increase in the supply of strawberries, a substitute

A decrease in the price of blueberry harvesting equipment

Imposition of a price floor in the market for blueberries

The table below shows the per-unit prices and marginal utility for the last unit of video games and comic books that Kyle purchased. Kyle spent all of his allocated budget on video games and comic books. To maximize his utility, Kyle should have purchased:

A perfectly competitive firm currently produces 1,000 units of output and hires its resources in a perfectly competitive factor market. It uses both labor and capital as inputs. The price of labor is $40; the price of capital is $100. The marginal product of labor is 8 units, and the marginal product of capital is 10 units. Which of the following must be true?

The firm can produce more than 1,000 units without increasing the total cost if it uses more labor and less capital.

The firm is currently maximizing its profit.

The firm can produce more than 1,000 units without increasing the total cost if it uses more capital and less labor.

The firm can reduce the cost of producing 1,000 units by using less capital and employing the same amount of labor.

The firm can reduce the cost of producing 1,000 units by employing less labor and using the same amount of capital.

When two firms interact in an oligopolistic market, which of the following statements is true?

If one firm has a dominant strategy, then the other firm does not have a dominant strategy.

If one firm has a dominant strategy, then the other firm also has a dominant strategy.

Both firms must have dominant strategies.

If one firm has a dominant strategy, then there is no Nash equilibrium.

If both firms have dominant strategies, then there is a Nash equilibrium.

Which of the following is true when a profit-maximizing monopolist produces in the elastic portion of its demand curve?

Marginal revenue is less than marginal cost.

It can increase total revenue by raising price.

It can decrease average total cost by reducing output.

Price is equal to marginal revenue.

Which of the following will the firm do in the long run if market conditions do not change?

It will increase output to Q3 and raise price to P4 to earn zero economic profit.

It will increase output to Q2 and lower price to P2 to minimize losses.

It will produce Q1 and set price equal to marginal revenue.

It will build a larger plant to achieve decreasing returns to scale.

At the current quantity that a firm is selling, the firm has marginal revenue of $750 and marginal cost of $800. Which of the following is true?

The firm earns negative economic profit.

The firm’s profits would increase if the firm increased the quantity sold.

The firm’s profits would increase if the firm decreased the quantity sold.

The firm earns zero accounting profit.

Which of the following is true of a monopsony in a labor market?

The imposition of a minimum wage results in a larger reduction in employment than is true in a competitive market.

It faces a labor supply curve that is horizontal at the competitive market equilibrium wage.

Its marginal factor (resource) cost is the same as the market supply curve.

At its optimal level of employment, it pays a wage rate higher than the competitive market wage rate.

Its marginal factor (resource) cost curve lies above the labor supply curve because hiring an extra worker means paying more to existing workers.

Which of the following indicates that a perfectly competitive firm has hired the profit-maximizing amount of labor?

The marginal revenue product of labor is above the wage paid to workers.

The total product of labor exceeds the total real wage payments to workers.

The average product of labor exceeds the real wage paid to workers.

The marginal revenue product of labor is below the wage paid to workers.

The marginal revenue product of labor equals the wage paid to workers.

In a competitive market in which the production of a good causes pollution, the socially optimal output is different from the competitive market equilibrium output of that good because the:

marginal social cost is higher than the marginal private cost

marginal social benefit is higher than the marginal social cost

marginal social benefit is lower than the marginal private cost

marginal social benefit is higher than the marginal private benefit

total social cost is less than the total social benefit

Which of the following explains why free-riding can result in a market failure?

Private producers of nonexcludable goods are unable to charge everyone who consumes the good.

More than the socially optimal quantity is produced and consumed.

The socially optimal quantity is produced but less than the socially optimal quantity is consumed.

There is a market surplus of the good.

There is no consumer surplus derived from the good.

Individual private property rights provide people incentives to:

produce goods and services that are valued in markets

meet societal goals rather than pursue their own self-interest

produce goods and services regardless of market demand

achieve equitable distribution of goods and services through competitive markets

focus only on benefits without regard to costs

Assume the market for disposable coffee cups is in equilibrium and disposable coffee cups are inputs for serving brewed coffee. Which of the following will result in a higher short-run equilibrium price of disposable coffee cups?

An increase in the demand for brewed coffee

A decrease in the supply of coffee

A decrease in the number of locations serving brewed coffee

An increase in the supply of disposable coffee cups

An increase in the price of tea, a complement for coffee

The equilibrium price for a good with a vertical supply curve and a downward-sloping demand curve is $20. If a binding price floor is set, which of the following will occur?

The sum of consumer and producer surpluses will decrease.

There will be a shortage of the good.

The equilibrium price of the good will decrease.

The quantity sold of the good will remain unchanged.

Demand for substitutes for the good will decrease.

The graphs above show the individual demand curves for the only two consumers, Adey and Sarah, in the market for popcorn. As the price of popcorn decreases from $12 to $6, how does the quantity demanded change along the market demand curve?

It increases from 2 to 8 units.

It increases from 2 to 4 units.

It increases from 2 to 5 units.

It increases from 0 to 14 units.

It increases from 8 to 14 units.

Which of the following is true for a firm that uses labor as a variable input and capital as a fixed input in the short run?

If the average product of labor is falling, the marginal product of labor must be less than the average product of labor.

If the marginal product of labor is negative, the average product of labor must also be negative.

If the marginal product of labor is rising, the average product of labor must be greater than the marginal product of labor.

If the average product of labor is rising, the marginal product of labor must be rising.

The average product of labor can never be equal to the marginal product of labor.

The characteristic that causes firms in a perfectly competitive industry to earn zero economic profits in the long run is

there are no barriers to entry or exit

firms produce identical products

individual firms account for a small fraction of the total market

the industry supply curve is horizontal

Economic Systems Quiz

Authored by Allison Murphy

Social Studies

12th Grade

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62 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is a defining characteristic of a market economy?

Private ownership of resources

Equitable distribution of income

Taxation of personal income

Reliance on public goods

Government-guided resource allocation

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X?

It decreases, because the production of good Y decreases by greater amounts.

It decreases, because the production of good Y increases by smaller amounts.

It remains constant, because the production of good X increases by the same amount.

It increases, because the production of good Y decreases by greater amounts.

It increases, because the production of good Y increases by smaller amounts.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded that good Y is

an inferior good

a luxury good

a normal good

a substitute for good X

a complement for good X

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following will shift the supply curve for apples to the right?

An increase in consumers’ income

An increase in the price of apples

An increase in the wages of apple pickers

A decrease in the rental price for apple harvesting equipment

A decrease in the demand for oranges, a substitute in consumption

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent?

Elastic Demand Increase Decrease

Elastic Demand Decrease Decrease

Unit Elastic Decrease Decrease

Inelastic Decrease Increase

Inelastic Decrease Decrease

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following best describes how a consumer maximizes total utility from the consumption of a bundle of goods and services?

By choosing the quantity of each good such that the marginal utility from each good is equal to zero

By choosing the combination of goods such that the marginal utility per dollar spent on the last unit of each good is equal

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The marginal benefit of consuming a good is

the change in average utility that results from consuming one more unit of the good

the maximum amount a consumer is willing to pay for one more unit of the good

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Economic Systems Quiz

Which of the following is a defining characteristic of a market economy?

The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X?

An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded that good Y is

Which of the following will shift the supply curve for apples to the right?

Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent?

Which of the following best describes how a consumer maximizes total utility from the consumption of a bundle of goods and services?

The marginal benefit of consuming a good is

The economic concept of total consumer surplus refers to which of the following?

The table below is partially filled in with the different types of costs for a firm. Based on the information in the table, what is the marginal cost of producing the second unit?

How many units of output should a firm with the cost and demand curves shown above produce to maximize profit?

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