Like profit-seeking, rent seeking is also a productive activity and contributes to the growth of the economy.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer), is 50 as Ed's opportunity cost of selling is 135 and Luis' valuation of the good is 185 . If each gains 25 from this transaction, which of the following conclusions can be drawn?
a. Transaction costs are zero.
b. Luis has higher bargaining power than Ed.
c. Ed has higher bargaining power than Luis.
d. Transaction costs are positive.
QUESTION 3Which of the following is not correct for an individual firm?
a. If the average variable cost (AVC) is decreasing, average total cost (ATC) must be decreasing.
b. AVC reaches minimum before ATC.
c. If ATC is increasing, AVC must be increasing.
d. If AVC is increasing, marginal cost (MC) is increasing.
e. If average fixed cost (AFC) is decreasing, ATC must be decreasing.
QUESTION 4A perfectly competitive firm faces a demand curve that is:
a. horizontal and perfectly inelastic.
b. horizontal and perfectly elastic.
c. vertical and perfectly inelastic.
d. vertical and perfectly elastic.
QUESTION 5An increase in economic rent is accompanied by an increase in the quantity supplied of a resource.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6What matters in Economics is:
a. how much gain a transaction yields.
b. how the gains from a transaction are split between the buyer and the seller.
c. how much gain the buyer realizes from a transaction.
d. that the transaction between a buyer and a seller takes place.
QUESTION 7For a steel manufacturing firm, overhead costs would include:
a. cost of iron ore.
b. cost incurred in buying blast furnaces.
c. insurance premiums of the firm.
d. wages of the workers.
e. cost of electricity for running the machines in the factory.
QUESTION 8Which of the following is a characteristic of perfect competition?
a. homogeneous products
b. many sellers
c. many buyers
d. all of the above
Quick Reply
