Chapter 7
Which of the following is NOT a shift variable of factor market supply
a) wealth
b) alternative uses
c) factor demand
d) preferences
c) factor demand
General equilibrium theory is important because it highlights the fundamental fact that a system of markets is a
a) single system
b) web of connections
c) simultaneous system
d) all of the above
d) all of the above
A monopoly is a firm that is a ____________, and a monopsony is a _______________.
single seller, multiple seller
single seller, single buyer
high price seller, low price seller
high price seller, high price buyer
2. single seller, single buyer
Externality problems are
hard to model but easy to solve because you just need to internalize the externality
hard to model and hard to solve because they are socially divisive issues
easy to model but hard to solve because there are no direct measures of the externality
4. easy to model and easy to solve, but solutions are rare because they are socially divisive issues
3. easy to model but hard to solve because there are no direct measures of the externality
Sunk costs are
a) costs that save time
b) costs that save money
c) costs that are a done deal
d) the cost of the Titanic
c) costs that are a done deal
Which of the following conditions does NOT influence the nature of the general competitive equilibrium (GCE) reached by an economy
a) the distribution of society’s initial endowment among individuals
b) price controls by government
c) individual taste and preferences
d) the current technology
b) price controls by government
A firm that has market power:
is not as efficient as it would be under perfect competition.
is always more efficient than a firm under perfect competition because it can maintain positive profits.
is always efficient because it can choose any price/quantity combination it desires.
is driven out of business due to inefficiency.
1. is not as efficient as it would be under perfect competition.
The great virtue of a market system that works well is that
a) everyone lives well
b) everyone lives pretty equally
c) everyone gets the most out of their resources
d) all of the above
c) everyone gets the most out of their resources
Monetary wages for different jobs can vary because of
a) human capital requirement differences
b) power advantage differences
c) psychic return differences
d) all of the above
d) all of the above
In economic theory, the distribution of the production from a market system is just when
a) society’s initial endowment is distributed equally among all individuals
b) everyone participates by a just (fair) set of rules
c) there is no standard of justice defined by economic theory
d) there are no super-rich people
c) there is no standard of justice defined by economic theory
Naturally occurring market power is
easy to get if you have enough guns
hard to get without government help
an advantage that can never be lost
none of the above
4. none of the above
Market power problems can be solved efficiently by
a) policing the power
b) exposing the power
c) creating countervailing power
d) none of the above
d) none of the above
Factor market demand is called a “derived” demand because
a) it’s derived from a mathematical equation
b) it’s measure is a derivative of D=x2
c) it depends directly on conditions in the product market
d) it depends directly on conditions on the supply side
c) it depends directly on conditions in the product market
The standard by which economists measure the efficiency of a general competitive equilibrium is:
a) Pareto Optimality
b) distributive justice
c) generally powerful equilibrium.
d) commutative justice
a) Pareto Optimality
Why will a gifted basketball player almost invariably make many many many many times more money than an equally gifted violinist?
the basketball player has to practice more
the market for basketball entertainment is bigger
the violinist only has to sit, there’s little action
all of the above
2. the market for basketball entertainment is bigger
An economist can state unequivocally that rent controls
increase efficiency by making apartments available, but reduce equity by cheating landlords
increase equity by making apartments available, but reduce efficiency by discouraging landlords
decrease efficiency and affect equity
affect efficiency and increase equity
3. decrease efficiency and affect equity
If you were to ask for a raise, ceteris paribus, the best case for you would be a _____ own price elasticity of demand for the product you’re producing and a _____ elasticity of input substitution for your factor contribution to the production
a) constant, low
b) low, high
c) high, low
d) low, low
d) low, low
Suppose that there is an excess supply in the market for tomatoes. Under our nice assumptions, as the system moves toward a general competitive equilibrium
a) the price of tomatoes will fall until the tomato market is in equilibrium, while all other markets will remain unchanged.
b) the price of tomatoes will fall until the excess supply is zero, but there will be an excess demand for all other vegetables.
c) the price of tomatoes will adjust towards an equilibrium price, and all other markets will also be simultaneously adjusting to equilibrium.
d) the price of tomatoes will not change because the government will buy the excess quantity in order to ensure efficiency.
c) the price of tomatoes will adjust towards an equilibrium price, and all other markets will also be simultaneously adjusting to equilibrium.
Rent‑seeking refers to:
the pursuit of a distributive share derived from advantage
the search for better technology
the use of the most efficient technique of production to get ahead in the market
the search for housing in urban areas
1) the pursuit of a distributive share derived from advantage
The question as to the role of government in the economy is
a) ultimately a technical question
b) ultimately a political question
c) ultimately a philosophical question
d) none of the above
c) ultimately a philosophical question