Econ 001 - Principles of Economics » Fall 2022 » Test 2 Ch 4-7

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Question #1
Opportunity costs of using resources contributed by the firm’s owners that are not obtained under contracts calling for payments are known as
A.   Survivorship costs
B.   Profits
C.   Implicit costs
D.   Explicit costs
Question #2
Full rationality means that people make use of all available information in determining how to best meet their objectives.
A.   False
B.   True
Question #3
Leader choice theory describes how people use the institution of government for their own interest.
A.   False
B.   True
Question #4
Suppose that Thomas, who formerly worked for someone else, gives up $15,000 in annual salary to open his own bookstore. After one year, his bookstore has explicit costs equal to $65,000 and total revenue equal to $75,000. According to these figures, which of the following is true?
A.   Normal profit is $15,250.
B.   Accounting profit is $25,000.
C.   None of these
D.   Pure economic profit is ($5,000 loss).
Question #5
An industry with a single seller of a good is called a monopoly.
A.   True
B.   False
Question #6
Utility measures the constraints facing consumers
A.   True
B.   False
Question #7
What term describes the key traits of a market including the number and size of firms, the extent to which the products of various firms are different or similar, the ease of entry and exit, and the availability of information?
A.   Subjective Traits
B.   Market Structure
C.   All of these
D.   Perfect Competition
Question #8
In perfect competition,
A.   There are no surpluses or shortages.
B.   All of these.
C.   The market equilibrium is efficient.
D.   Firms earn no profit in the long run because price is equal to average cost.
Question #9
Accounting profit
A.   Is equal to total revenue less implicit and explicit costs.
B.   is equal to pure economic profit plus implicit costs.
C.   Is equal to total revenue less implicit costs.
D.   None of these
Question #10
An objective is anything that people want to achieve.
A.   True
B.   False
Question #11
The excess burden of a tax refers to
A.   the portion of the tax paid by the only producers.
B.   the portion of consumer and producer surplus lost because of the reduction in the quantity sold.
C.   the difference between the tax paid by the consumers and the producers.
D.   the portion of the tax paid by only the consumers.
Question #12
Full rationality assumes that the choices are made to best meet the individual’s objective, with all information available. Information is obtained and research is conducted to help maximize the consumer’s selection.
A.   True
B.   False
Question #13
Bounded rationality is based upon which of the following?
A.   Elastic demand
B.   Governmental actions
C.   Limited ability to acquire information
D.   All available information
Question #14
Rising price levels reduce the buying power of one's nominal income.
A.   True
B.   False
Question #15
Government failure occurs when government action results in a less efficient allocation of resources.
A.   True
B.   False
Question #16
Economic theory assumes that it is the goal of all firms to achieve the highest possible
A.   Costs
B.   All of these
C.   Profit
D.   Production
Question #17
Which of the following is an example of a fixed cost in the manufacture of automobiles?
A.   The cost of constructing the factory building.
B.   The cost of sheet metal used in the automobile’s construction.
C.   The cost of hiring workers to run the assembly line.
D.   All of these.
Question #18
All economic theories have objectives, constraints, and choices.
A.   True
B.   False
Question #19
A theory is anything that people want to achieve.
A.   True
B.   False
Question #20
Externalities lead to efficient market performance because they always have beneficial third-party effects.
A.   True
B.   False
Question #21
Costs of goods sold, salaries expense, and utilities expense are known as
A.   Explicit costs
B.   Survivorship costs
C.   Implicit costs
D.   Profits
Question #22
The difference between what a consumer is willing to pay and the amount actually paid is
A.   a durable good
B.   the substitution effect
C.   consumer surplus
D.   the income effect
Question #23
A Giffen good
A.   has an upward sloping demand curve.
B.   All of these.
C.   Has large income effects compared with substitution effects.
D.   must be an inferior good.
Question #24
A public good is a good that, when provided to one person, can be provided to others at zero additional cost.
A.   False
B.   True
Question #25
The demand and supply curves for a product illustrate externalities.
A.   True
B.   False
Question #26
A situation in which there is only one buyer is known as a monopoly
A.   True
B.   False
Question #27
Costs that, once incurred, cannot be recovered are known as
A.   sunk costs
B.   variable costs
C.   normal costs
D.   fixed costs
Question #28
The income effect arises from
A.   The substitution of one good for another when the prices of goods change.
B.   The increase in marginal utility resulting from an increase in real income.
C.   Neither
D.   The decrease in real income caused by an increase in the price of a good.
Question #29
Pure economic profit
A.   Is equal to total revenue less explicit costs.
B.   None of these
C.   Is equal to total revenue less implicit costs.
D.   Is equal to total revenue less implicit and explicit costs.
Question #30
Public goods lead to efficient market performance because of free riders.
A.   True
B.   False
Question #31
Perfectly-competitive firms are price takers because
A.   Firms have equal access to information.
B.   There are no barriers to entry.
C.   All of these.
D.   Many small firms offer a homogenous product.
Question #32
Bounded rationality means that people don’t always intend to make choices that best serve their objectives.
A.   False
B.   True
Question #33
Efficient market performance implies that people trade, but that these trades are not always mutually beneficial.
A.   True
B.   False
Question #34
What is the definition of Ockham’s razor?
A.   Complex theories and simple theories explain different objectives.
B.   Complex theories are better than simple ones.
C.   Simple theories are better than complex ones.
D.   Simple theories are incompatible with complex theories.
Question #35
Ockham's razor stresses simple over the complex, if either will work.
A.   True
B.   False
Question #36
Self-regarding preferences usually are concerned with the material well-being of others.
A.   True
B.   False

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