Principle of diminishing returns

Question

Question 1: According to the principle of diminishing returns, an additional worker decreases total output

• True
• False

Question 2: The marginal output of labor is the amount of output that can be produced if one more unit of labor is added

• True
• False

Question 3: People will buy more of a normal good when their income increases

• True
• False

Question 4: People will buy more of an inferior good when their income decreases.

• True
• False

Question 5: As the price of a product rises, the quantity supplied increases

• True
• False

Question 6: To compute the price elasticity of demand, we divide the percentage change in price by the percentage change in quantity demanded

• True
• False

Question 7: In general, the demand for a product is more elastic in the long run than in the short run (Points: 1)

• True
• False

Question 8: The marginal cost curve always intersects the average total cost curve at the minimum of average cost.

• True
• False

Question 9: Diminishing marginal returns occur in the long-run.

• True
• False

Question 10: The long-run supply curve is upward sloping in a constant cost industry

• True
• False

Question 11: The Latin phrase ceteris paribus means that when a relationship between two variables is being studied

• we recognize that some factors are unknown.
• both are treated as unpredictable
• all other variables are held fixed
• neither of those two variables is allowed to change.

Question 12. An example of physical capital is:

• strength needed to perform physical labor.
• money
• stocks and bonds.
• a laser printer.

Question 13: The principle that what matters to people is the real value or purchasing power of money, is the:

• real-Norminal  principle.
• marginal principle.
• spillover principle
• principle of diminishing returns

Question 14: Economics is the study of

• how government officials decide which goods and services are produced
• how society uses limited resources
• how to invest in the stock market.
• the role of money in markets.

Question 15: Macroeconomics is best described as the study of:

• the nation's economy as a whole
• the relationship between inflation and wage inequality
• the choices made by individual households, firms and governments
• very large issues.

Question 16: The opportunity cost of something is

• the price charged for it
• the search cost required to find it
• the cost of the labor used to produce it
• the best alternative you sacrifice to get it.

Question 17: If there is a negative relationship between x and y, then when:

• x increases y does not change
• neither x nor y change
• y increases x does not change
• when x increases y decreases.

Question 18: The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output

• decreases at a decreasing rate
• decreases at an increasing rate
• increases at a decreasing rate
• increases at an increasing rate

Question 19: Judy demands more peanuts as her income increases. From this, we can conclude that

• peanuts are a complementary good.
• peanuts are an inferior good.
• peanuts are a substitute good.
• peanuts are a normal good.

Question 20: The price elasticity of demand is calculated by:

• the percentage change in price divided by the percentage change in quantity demanded
• the change in price divided by the change in quantity demanded.
• the change in quantity demanded divided by the change in price.
• the percentage change in quantity demanded divided by the percentage change in price.

Question 21: If the price elasticity of demand is 0.5, this means that a ________ increase in price causes a ________ decrease in quantity demanded.

• 20%, 100%
• 20%, 10%
• 5%, 1%
• 20%, 1%

Question 22: The responsiveness of quantity demanded to a change in price is known as the:       

• rice elasticity of demand
• price elasticity of supply.
• income elasticity of demand.
• cross elasticity of demand.

Question 23: If a product has few acceptable substitutes, demand for the product is most likely to be:

• elastic.
• inelastic.
• very elastic
• very inelastic.

Question 24: The price elasticity of demand reflects the responsiveness of:

• demand to a change in price.
• demand to a change in price of a substitute good.
• how firms respond to changes in demand.
• quantity demanded to a change in price.

Question 25: A good synonym for elasticity would be:

• demand
• change
• responsiveness
• stickiness

Question 26: An inferior good is defined as a good for which demand decreases when:

• the price decreases
• income decreases.
• income increases
• the price increases.

Question 27: Assume that butter and margarine are substitutes. When the price of butter increases

• the demand for margarine increases.
• the supply of margarine decreases.
• the supply of margarine increases.
• the demand for margarine decreases.

Question 28: The law of demand states that quantity demanded of a product increases as:

• the price of the product rises
• the price of the product falls.
• consumer income rises
• the prices of other products fall.

Question 29: Accountants include ________ costs as part of a firm's costs, while economists include ________ costs.

• implicit, no implicit
• explicit, no explicit
• explicit and implicit,implicit
• explicit, explicit and implicit

Question 30: In the short-run, ________ factors of production are fixed, while in the long-run, ________ of them are

• some, none
• no, at least some
• all, at least some
• all, none

Question 31: The minimum efficient scale is:

• the output level beyond which the firm will not experience scale economies.
• the minimum quantity where a firm would be able to produce profitably
• the output level beyond which the firm will experience scale economies.
• the quantity after which it makes no sense for a firm to produce.

Question 32: A firm experiences diminishing marginal returns because:

• all factors of production are variable
• people "learn by doing."
• at least one factor of production is fixed.
• all factors of production are fixed.

Question 33: In long-run equilibrium for a competitive firm economic profits

• may be positive, negative, or zero
• will be positive
• will be zero.
• will be negative.

Question 34: A firm's average profit is the difference between:

• price and average cost.
• total revenue and total cost.
• total profit and marginal profit.
• its fixed and variable costs

Question 35: In short-run equilibrium for a competitive firm economic profits:

• will be zero
• will be negative.
• may be positive, negative, or zero.
• will be positive.

Question 36: An input is indivisible if

• it cannot be used as a substitute for other inputs in the production process.
• it cannot be scaled down to produce a smaller quantity of output.
• it cannot be increased to produce a larger quantity of output.
• it is sufficiently inexpensive to purchase that firms will want to buy as much as they can.

Question 37: Natural monopolies:

• are usually small companies.
• often compete against a large number of competitors.
• are often regulated

Question 38: A market served by only one firm is called a

• monopoly
• perfectly competitive market.
• oligopoly.
• Any of the above could be correct.

Question 39: Which of the following is not a characteristic of a monopolistically competitive market?

• Firms have some control over price.
• Firms hold patents on their products.
• There are no artificial barriers to entry.
• The products that firms sell are slightly different.

Question 40: A group of firms that coordinate their pricing decisions is a(n):

• coalition.
• industry.
• natural monopoly
• cartel.

Question 41: As compared to a perfectly competitive firm, a monopolistically competitive firm will:

• have more control over price.
• have less control over price.
• face many more competitors
• face more barriers to entry.

Question 42: The word "monopolistic" in the label "monopolistic competition" refers to the fact that:

• there is only one firm producing in the market.
• each firm produces a unique version of the product.
• firms have no control over the price they charge.
• none of the above

Question 43: When firms cooperate with each other rather than compete:

• both consumers and firms end up better off.
• they will agree to set low prices to help each other out.
• the firms will end up better off (they will act as a monopoly).
• consumers will end up better off.

Question 44: An arrangement between firms whereby decision making is controlled by a board of trustees is known as

• a compact between industry and government.
• a merger
• predatory pricing.
• a trust.