Archives

If two firms that form a cartel agreement are in a prisoner’s dilemma game, then a. both firms will have an incentive to break the agreement. b. only one firm will have an incentive to break the agreement. c. both […]

Which of the following is true of price and marginal revenue for the first unit of output sold by a monopolist? a. Price is greater than marginal revenue. b. Price is less than marginal revenue. c. Price is equal to […]

Exhibit 34-10 Who has the comparative advantage when it comes to mowing lawns? a. Danielle b. Jason c. neither Jason nor Danielle d. both Danielle and Jason Exhibit 3-5 In the market shown, a rightward shift in demand from D1 […]

Exhibit 34-10 Danielle’s opportunity cost of cleaning the house is a. 0.50 mowed lawns. b. 1.00 mowed lawns. c. 2.00 mowed lawns. d. 0.60 mowed lawns. In a political election, a candidate whose positions are on the left will tend […]

A __________ good is one that once produced and provided to one person, provides benefits to other persons. a. consumption b. investment c. private d. public In all cases, positive economics deals with a. what is. b. what should be. […]

Profit can be earned by buying _____________ and selling ____________________. a. at one price; at the same price b. low; high c. high: low d. none of the above Suppose the production of a good results in positive externalities. If […]

One of the objectives of the health-care reform bills passed in March 2010 was to bring _____________ people into the pool of insured persons so that insurance policies would become ________________.However, provisions in the bill are likely to make the […]

The absolute price of a good is the price of that good in terms of another good. a. True b. False Economist Charles Kindleberger (a proponent of fixed exchange rates mentioned in the text) would agree with which of the […]

The quantity demanded of good A rises as income rises. It follows that income elasticity of demand is __________than 0, and good A is a(n) __________ good. a. greater; inferior b. greater; normal c. greater; substitute d. greater; complementary e. […]

The average-marginal rule states: a. when the marginal magnitude is rising, the average magnitude must also be rising. b. when the marginal magnitude is falling, the average magnitude must also be falling. c. when the marginal magnitude is below the […]

If a U.S. company operates within a competitive environment and chooses to offshore part of its production process, the resulting change in the firm’s costs should shift the ______________ curve for its product ___________________, thus _____________ the price of the […]

Exhibit 27-1 What dollar value goes in blank (D)? a. $12 b. $28 c. $36 d. $18 A perfectly competitive firm that wants to maximize profits or minimize losses will produce in the short run as long as a. customers […]

If there is a negative externality, and the market output is 100 units more than the socially optimal output, then it follows that a. the external costs associated with the negative externality are greater than the marginal private costs. b. […]

Exhibit 22-13 What dollar amounts go in blanks (A) and (B), respectively? a. $200; $100 b. $200; $200 c. $50; $100 d. $10; $100 e. There is not enough information to answer this question. A bond is a. a claim […]

Candidate A says, “Health care is too expensive in the United States. We need to do something-and quickly-to develop a better, more responsive, less expensive health care system.” Candidate B, who is running against candidate A in a two-person race, […]

What value goes in blank (A)? a. 47.5 b. 100 c. 80 d. 95 e. There is not enough information to answer this question. Answer: d A change in the expected rate of inflation from 3 percent to 5 percent […]

Between 1910 and today, the number of farmers in the United States _____________ dramatically as a result of ___________________ in farming in the twentieth century. a. dropped; technological improvements b. rose; technological improvements c. dropped; technological declines d. rose; technological […]

Which of the following is a major import for the United States? a. corn b. soybeans c. coal d. fish e. none of the above When the government _____________ mortgage lending standards, the indirect result is likely to be _____________ […]

Situation 32-1 In the early 1980s, the U.S. automobile industry managed to influence the government to negotiate a voluntary export restraint agreement with Japan that was in effect from 1981 until 1985. The predictable result was an average increase in […]

As long as the demand curve lies above the marginal revenue curve for a monopolist, it will charge a price for its product that is a. above total cost. b. below marginal cost. c. above marginal cost. d. above average […]

Hank goes to a Korean restaurant for the first time and he has no prior knowledge ofKorean. He orders the Daenjang Chigae prepared medium hot and hopes for the best. Here an information __________ is __________ a market outcome. a. […]

Consumers receive more consumers’ surplus when __________. a. tariffs exist. b. tariffs and quotas do not exist. c. quotas exist. d. a and c If demand for a given good is elastic, then a given percentage change in price will […]

Exhibit 24-7 Let D be the demand curve facing a perfectly price-discriminating monopolist. The lowest price this monopolist will charge is a. $60. b. $45. c. $30. d. $0. A public good is a. a good that government provides to […]

Which of the following statements is true? a. A major corporation would tend to pay a higher interest rate for a $10,000 loan than a single parent working for a fast food restaurant. b. The more risky the loan, the […]

The addition to total cost that results from employing one additional unit of a resource is called a. average factor cost. b. marginal factor cost. c. average total cost. d. marginal cost. If goods are not rationed according to price, […]

Special interest group Z receives a 1/200th slice of the economic pie.Its net benefit from both an economic growth policy and a transfer policy is $30,000.How much does the size of the economic pie (Real GDP) need to grow before […]

Economists often assert that a person who receives an in-kind transfer payment (from government) has a higher income as a result. But an in-kind transfer is not money income, so what are economists thinking? a. They are thinking that an […]

The producers of good X are earning (positive) economic profits and the producers of good Z are receiving economic losses. A likely consequence is that (in time) resources will be shifted out of producing good Z and into producing good […]

As the marginal physical product of U.S. workers _________________, the marginal cost of goods produced in the U.S. ______________ and unit costs _____________.This makes American goods ________________ competitive in the global marketplace. a. rises; falls; fall; less b. falls; falls; […]

Exhibit 3-6 If an increase in income causes the demand for good X to shift from D1 to D2,then good X is a. a normal good. b. an inferior good. c. a substitute good. d. a complementary good. e. a […]

Exhibit 39-4 The government feels that the present level of farmers’ total revenues is insufficient to support a reasonable standard of living and wants to raise it to exactly $3,000. This can be achieved by a. restricting supply so that […]

A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.11 to 0.08 while raising the number of accidents per period from 100,000 to any more than a. 108,000. b. 111,111. […]

If patients were allowed to sue their HMO, we would expect a. the demand curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to fall. b. the […]

If the demand for a particular farm product is inelastic between price P1 and P2 (where P2 > P1), farmers as a group would want to sell their product at the a. higher price, but an individual farmer would rather […]

In a simple majority vote on a public project, a. the project will never be undertaken if the costs exceed the benefits. b. the project may be undertaken even though the total costs exceed the total benefits. c. the intensity […]

If, through collective bargaining, a union is able to raise the wage above the existing competitive equilibrium wage, a. fewer workers will be employed than before the wage increase. b. more workers will be employed than before the wage increase. […]

Which of the following statements is true? a. The less you have of any one good, the less you would be willing to pay for one more unit of it. b. The less you have of any one good, the […]

When a decision is made based on a simple majority vote it is possible for the total benefits to the community of this decision to be less than the total costs to the community of this decision. a. True b. […]

In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition a. TUA = TUB. b. TUA/PA = TUB/PB. c. MUA = MUB. d. MUA/PA = MUB/PB. […]

Consider two labor markets, C and D. Wages in labor market D fall. This could be due to a. the marginal revenue curve in the product market (that employees in labor market D supply with goods) shifts to the left. […]

A man moves from a large city to a small town.In the small town he seems like a very different person than the person he was in the big city.For instance, he is more polite in the small town than […]

Simple majority voting sometimes leads to projects being undertaken whose costs are greater than the benefits. How is this possible? a. It is not possible, unless the voting results are rigged. b. Because voters have no way to express the […]

Which of the following was not given as a reason for income differences in the textbook? a. luck b. low minimum wage c. wage discrimination d. risk taking A government agricultural policy in which a guaranteed price is set and […]

Which of the following would NOT be considered a macroeconomic topic? a. the reasons for a decline in the price of crude oil b. the cause of a downturn in the economy c. the effect of the government budget deficit […]

The perfectly competitive firm’s short-run supply curve is the a. upward-sloping portion of its average total cost curve. b. horizontal portion of its marginal revenue curve. c. portion of its average variable cost curve that lies above the average fixed […]

Exhibit 38-3 Which of the two stocks has a bigger gap between its close price and net earnings per share? a. Stock ABC b. Stock XYZ c. Both stocks have the same gap between its close price and net earnings […]

Carlos can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. The opportunity cost of one unit of X for Carlos is a. 1 unit of Y. b. 2 units of […]

The “voluntary bumping plan” used by airlines to resolve the problem of overbooked flights was developed by economist a. Adam Smith. b. John Maynard Keynes. c. Alan Greenspan. d. Julian Simon. Exhibit 39-6 A major change in weather conditions favorable […]

Economists believe that people’s wants are a. finite. b. infinite. c. irrational. d. unimportant because needs are more important than wants. Which of the following is an example of a positive economic statement? a. The U.S. public should devote more […]

The main difference between the short run and the long run is that a. firms earn losses in the long run, but not in the short run. b. the long run always refers to a time period of one year […]

A decrease in the wage rate a. shifts the supply curve of labor rightward. b. increases the quantity supplied of labor. c. shifts the supply curve of labor leftward. d. decreases the quantity supplied of labor. If medical research were […]

The disagreement between A. C. Pigou and Ronald Coase arose because a. Pigou argued that the government should ban all externality-generating activities, while Coase thought that taxes and subsidies should be used instead. b. Coase argued that the government should […]

The Mexican demand for American goods leads to a. the demand for Mexican pesos and the supply of U.S. dollars on the foreign exchange market. b. the demand for U.S. dollars and the demand for Mexican pesos on the foreign […]

The situation where a country can produce a good at a lower opportunity cost than another country is called a(n) __________ advantage. a. permanent b. transitory c. absolute d. comparative e. natural A simultaneous decrease in the demand and the […]

Exhibit 23-7 The perfectly competitive, profit-maximizing firm will produce __________ units of output. a. 10 b. 30 c. 50 d. 60 e. 70 Which of the following can cause an increase in real wages? a. a technological advance that increases […]

In a perfectly competitive industry, there is a motive for __________ to advertise in order to induce a rightward shift of the demand curve. a. the typical firm b. the industry as a whole c. both the typical firm and […]

The additional revenue generated by a firm by hiring one more unit of a factor of production is the a. MFC. b. MC. c. MR. d. MRP. e. MPP. In 2014 a woman won a $100 million lottery. Her income […]

A rationing device is a method used to resolve who gets what of available goods and resources. a. True b. False A theory is an abstract representation of reality. This means a theory a. is descriptive of the way the […]

Which of the following issues is most unlikely to be addressed by an economist practicing positive economics? a. the relationship between the minimum wage and the number of unemployed unskilled workers b. the effect of a minimum wage increase on […]

In which market structure can the good being produced be either homogeneous or differentiated? a. monopolistic competition b. oligopoly c. monopoly d. perfect competition e. none of the above If the four-firm concentration ratio in an industry is 80 percent, […]

Which of the following statements is false? a. Specialization and trade allow a country’s inhabitants to consume at a level beyond its production possibilities frontier. b. Some of the goods the U.S. exports include cars, coal, and wheat. c. Some […]

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then a. output will be at the socially optimal level. b. the price of […]

Based on the income data presented for the U.S. (in your text) the Gini coefficient was around 0.45 in 2007, which is higher than it was in 1947. a. True b. False Exhibit 2-6 Which graph depicts a discovery of […]

In moving along a demand curve for good X, which of the following is NOT held constant? a. the prices of substitute goods for good X b. the prices of complementary goods for good X c. incomes of consumers of […]

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the a. demand for the product produced by labor. b. price of the product. c. quantity supplied […]

Economists predict that the __________ the cost of shirking to an individual, the __________ shirking that individual will undertake, ceteris paribus. a. lower; less b. higher; less c. lower; more d. higher; more e. b and c Which of the […]

Exhibit 28-2 One of the things that the labor union probably can do to convince management that the supply curve is S’S instead of SS is a. make a credible threat of a strike. b. ask workers to take a […]

In which market structure is the interdependence of firms a key characteristic? a. perfect competition b. monopolistic competition c. oligopoly d. monopoly Situation 4-1 During the winter of 1973-74, a general system of wage and price controls (including a price […]

If a labor union can affect __________, it can affect its wage-employment tradeoff. a. the availability of substitutes for the product it produces b. availability of substitute factors c. the fixed costs of the firm it works for d. a […]

Value marginal product (VMP) is a. a measure of additional revenue minus additional cost as a result of additional output. b. the price of the product multiplied by the additional output resulting from an additional factor unit employed. c. the […]

A good is unit elastic in demand if as the price changes there is no resulting change in total revenue. a. True b. False We take one dollar from a pauper and give it to a millionaire. Assuming a diminishing […]

The monopolistic competitor is a a. price taker. b. price searcher. c. single seller of a good with no close substitutes. d. firm that faces a horizontal demand curve. e. b and c Which of the following situations probably would […]

Which of the following statements represents a correct and sequentially accurate economic explanation? a. Good X is an inferior good and good Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, […]

Exhibit 26-4 What is the productive-efficient level of output? a. Q1. b. Q2. c. Q3. d. Q4. e. Q5. A good will tend to have a low price elasticity of demand if a. the good has few substitutes. b. a […]

If a negative externality exists, then there is a __________ when society produces the market output instead of the socially optimal output. This exists because the __________ to sellers and third parties are __________ the __________ derived by buyers. a. […]

Which of the following is probably not an acceptable solution to the problem of diseconomies of scale? a. reorganization b. building a larger plant c. dividing operations d. hiring new managers If the nominal interest rate is 9 percent and […]

A profit-maximizing monopolistic competitive firm that produces at the level of output where MR = MC will set the price at a. $100 per unit. b. $90 per unit. c. $80 per unit. d. $60 per unit. e. $50 per […]

The assumption that precludes economic profits in monopolistic competition in the long run is that a. there are many buyers and sellers. b. the firms produce a homogeneous product. c. there is easy entry and exit in this market structure. […]

According to the law of demand, the higher the price of an assigned textbook, the _______________ the quantity demanded of assigned textbooks will be,ceteris paribus, and the ______________ likely students will seek out an alternative to the assigned textbook. a. […]

Exhibit 23-7 At the profit-maximizing output level, average total cost is a. $2.00. b. $4.50. c. $5.00. d. $6.00. e. This cannot be determined based on the information provided. As firms exit an industry, the industry supply curve shifts __________ […]

A stock with a price-earnings ratio of 11.2 means that the stock is selling for a closing share price that is 11.2 times its latest available net earnings per share. a. True b. False The producer of good X is […]

At the quantity of output for which total revenue equals total cost, a. economic profit is zero. b. cost is minimized. c. cost is maximized. d. quantity is minimized. e. profit is maximized. The Sherman Act of 1890 a. made […]

The monopoly firm may earn positive economic profits in the long run because a. it produces a homogeneous product. b. it is the only firm that wishes to produce the product. c. of high barriers to entry. d. a and […]

If you thought the share price of a stock was going to fall, would you be more likely to buy a call option or a put option? a. a call option b. a put option c. a call option and […]

A three-word synonym for the term ceteris paribus is a. “nothing else changes.” b. “in my opinion.” c. “it is proved.” d. “under this assumption.” There is a flexible exchange rate system and only two countries in the world, the […]

Exhibit 31-2 This graph represents a positive externality situation. Given this, which of the two curves, X or Y, represents marginal social benefits and why? a. Curve X, because if there is a positive externality, negative external benefits are associated […]

The exchange rate is $1 = 110 yen. If the price of a Japanese good is 37,500 yen, what is the approximate price of the good in dollars? a. $29.45 b. $4,125,000 c. $294.49 d. $340.91 e. none of the […]

Jake is an excellent barber. However, all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as a. a tie-in sale. b. a sweetheart deal. c. an exclusive contract. […]

Exhibit 28-6 L and W are the equilibrium quantity of labor employed and the wage rate respectively. A person arguing that a worker is being exploited if she is paid less than the value of her marginal product would say […]

Economists generally agree that land rents are a. price determining, not price determined. b. price determined, not price determining. c. too high. d. too low. e. Economists generally do not agree on anything. The demand curve facing a firm in […]

If all firms in an industry sell their product for the same price it is a result of a. collusion. b. perfect competition. c. a government law that specifies all firms must charge the same price. d. a or b […]

Exhibit 22-13 What dollar amounts go in blanks (M) and (N), respectively? a. $200; $125 b. $120; $150 c. $230; $125 d. $150; $300 e. There is not enough information to answer this question. The nominal interest rate is the […]

Which of the following statements is true? a. Treasury bills mature in 2 to 10 years. b. Treasury notes mature in 13 or 26 weeks. c. Treasury bills, notes, and bonds are considered to be very safe investments. d. Municipal […]

The coordinates of point A are 20 units of X and 36 units of Y. The coordinates of point B are 22 units of X and 30 units of Y. With X on the horizontal axis and Y on the […]

A rising marginal cost curve is a reflection of a a. rising marginal physical product curve. b. falling marginal physical product curve. c. falling average fixed cost curve. d. rising average variable cost curve. Exhibit 2-4 The opportunity cost of […]

The author of the textbook defines economics as the a. science of efficiency. b. science of scarcity. c. study of markets. d. study of human activity. Marginal revenue product (MRP) is the a. additional output generated by employing an additional […]

____________________ constitute(s) perhaps the most significant barrier to entry into an oligopolistic market. a. Patent rights b. Exclusive ownership of essential resources c. Legal barriers d. Economies of scale e. Copyrights A bond purchaser bought a bond from which she […]

The key behavioral assumption of the cartel theory is that oligopolists in an industry a. try to maximize sales instead of profits. b. act as if they are perfect competitors. c. act in a manner consistent with there being only […]

Exhibit 23-9 Following an increase in market demand from D1 to D2, the firm’s profits in the short run will a. remain the same at P1 times q1. b. remain the same at zero. c. increase by less than (P2 […]

At a price of $12, there is a ____________ unit____________ of good X. a. 195; shortage b. 230; shortage c. 195; surplus d. 230; surplus e. 180; shortage Labor unions have caused a. the fraction of national income that goes […]

Exhibit 34-1 If country A is to specialize in the production of one of the two goods (and then trade that good with Country B), which good should it be and why? If Country B is to specialize in the […]

The slope of a (nonlinear) curve varies from one point to another. a. True b. False Exhibit 29-3 The Gini coefficient for the income distribution of the country depicted in the exhibit is a. a number less than 0. b. […]

Exhibit 28-8 An effective price floor set at W3 would a. increase employment from Q1 to Q2. b. increase employment from Q3 to Q4. c. decrease employment from Q5 to Q2. d. decrease employment from Q5 to Q4. It is […]

Some economic studies have shown that mandatory seat belt laws do not lead to a reduction in traffic fatalities. a. True b. False The answer is: “rational ignorance.” What is the question? a. Why do special interest groups lobby politicians? […]

Decision making “at the margin” means making a choice based on __________ of a decision. a. the total benefits b. the total costs c. comparing the total benefits and costs d. comparing the additional benefits and costs Exhibit 3-2 Suppose […]

Minimum efficient scale refers to the a. minimum size plant in any given industry. b. minimum point on the short-run average total cost curve. c. output level when economies of scale first set in. d. output level when diseconomies of […]

Exhibit 34-4 The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2. a. 20A; 15A b. 2A; 1A c. 40A; 15A d. 1/2A; 1A e. 1/40A; 1/15B If the current market […]

Exhibit 28-8 If the monopsonist could perfectly discriminate by paying each worker a different wage rate, the number of workers employed would be a. Q1. b. Q2. c. Q3. d. Q4. e. Q5. If the price elasticity of demand for […]

For a factor price taker, the demand for labor curve is horizontal at the going market wage. a. True b. False Exhibit 39-4 At the government-established support price of $5 per bushel, the wheat surplus that government buys equals a. […]

The primary intent of antitrust legislation is to a. ensure that product safety standards are met. b. eliminate positive economic profits. c. eliminate price discrimination. d. control monopoly power and preserve and promote competition. e. all of the above Saying […]

In general, agricultural price supports a. raise food prices. b. have no impact on food prices. c. are designed to lower food prices. d. c and d Firm X is a single seller of good X. There are, however, two […]

A rightward shift in the demand curve for tennis balls could be caused by a. a fall in the price of tennis balls. b. a fall in the price of tennis rackets. c. a rise in the price of tennis […]

The Federal Trade Commission Act of 1914 a. made interlocking directorates illegal. b. set up the Federal Trade Commission (FTC) to deal with “unfair methods of competition.” c. made monopolization of trade a misdemeanor. d. prohibited suppliers from offering special […]

Exhibit 29-2 This graph depicts the Lorenz curve for two countries, country 1 (Lorenz curve 1) and country 2 (Lorenz curve 2).The Gini coefficient associated with Lorenz curve 1 appears to be ____________ than the Gini coefficient associated with Lorenz […]

Unions are interested in increasing the productivity of their members because as their productivity rises, the __________ their labor __________ and their wages __________. a. demand for; falls; rise. b. demand for; rises; rise. c. supply of; rises; rise. d. […]

Entrepreneurs a. operate within markets. b. increase trade by satisfying an unmet demand for a good or service. c. increase trade by increasing the transaction costs of making trades. d. a and b e. a, b and c The economy […]

Total industry sales are $750 million. The four largest firms have sales of $256 million, $120 million, $78 million, and $42 million. The industry’s four-firm concentration ratio is a. 0.66. b. 0.69. c. 0.39. d. 0.14. The excludability versus nonexcludability […]

When the government enacts policies that lead to lower mortgage lending standards and lower interest rates, their actions can indirectly lead to higher home prices. a. True b. False The difference between artificial rents and real rents is that a. […]

If it takes 118 Japanese yen to buy one dollar, then how many dollars does it take to buy one euro? a. $0.0085 b. $1.18 c. $0.85 d. $0.01286 e. There is not enough information to answer the question. Suppose […]

A fixed input, X, and a variable input, Y, are used to produce good A. If the marginal physical product (MPP) of Y is constant, it follows that the a. marginal cost curve is upward sloping. b. total fixed cost […]

Which of the following is an example of government regulation of a natural monopoly distorting incentives? a. A natural monopoly is held to average-cost pricing; therefore, it has little incentive to hold costs down. b. A natural monopoly is protected […]

The cross elasticity of demand coefficient between Coca-Cola and Pepsi Cola would be expected to be negative. a. True b. False The Alchian and Demsetz theory of why business firms exist suggests that a. there are only advantages to team […]

If the student whose marginal benefits and costs of good health are noted in this table, how many units of good health should the student obtain in order to maximize her net benefits of good health? a. 2 units b. […]

A firm will maximize its profits by hiring factors up to the point at which a. MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist. b. P = MC, if the firm is a perfect competitor. […]

As the marginal physical product curve rises, a. the marginal cost curve rises. b. the marginal cost curve falls. c. the total cost curve rises. d. the total cost curve falls. The side effect of an action that increases the […]

The single-price monopolist produces the quantity of output at which marginal cost equals marginal revenue and charges a price that is greater than marginal revenue. a. True b. False If new legislation allowed patients to sue their health-maintenance organization (HMO), […]

Suppose firm X is a monopolist and is receiving positive economic profits. What prevents other firms from directly competing away the profits? a. high barriers to entry b. antitrust laws c. low barriers to entry d. diseconomies of scale e. […]

Variables X and Y are independent of each other. If we plot X on the horizontal axis and Y on the vertical axis, the line that connects combinations of X and Y in a two-variable diagram is a. parallel to […]

Studies show that as real income has been rising in the United States, the per-capita demand for food has been increasing by a. much less, which means the demand for food is income inelastic. b. much more, which means the […]

Exhibit 34-11 If the world price (PW) is operational in the market, then U.S. imports equal a. Q4 – Q2. b. Q2 – Q3. c. Q4 – Q3. d. Q2 – Q1. e. Q3 – Q1. Suppose that when the […]

Assuming that total fixed costs are $30, the average variable cost of producing 2 units of output is a. $35. b. $75. c. $45. d. $55. e. There is not enough information given to answer this question. When the equilibrium […]

The __________ one’s income, the __________ one’s budget constraint. a. smaller; further away from the origin b. larger; closer to the origin c. larger; further away from the origin d. smaller; steeper the slope of e. larger; steeper the slope […]

One implication of the median voter model is that candidates running for political office take polls because a. everyone does it. b. they want to know if they should maintain their current positions or modify them. c. it is good […]

The closed shop was prohibited by the a. Norris-LaGuardia Act. b. Clayton Act. c. Wagner Act. d. Taft-Hartley Act. e. none of the above Exhibit 23-4 Where can you find the lowest price that will motivate the firm to produce […]

Exhibit 23-7 At the profit-maximizing level of output, marginal cost is a. $60.00. b. $4.50. c. $5.00. d. $6.00. e. This cannot be determined based on the information provided. Approximately how much money would you need to place in a […]

Evidence seems to indicate that the demand for many agricultural products a. has increased much more than supply over the years. b. is relatively elastic. c. is relatively inelastic. d. is relatively income elastic. e. b and d Which of […]

A natural monopoly exists when a. a monopolist produces a product, the main component of which is a natural resource. b. economies of scale are so large that only one firm can survive and achieve low unit costs. c. a […]

Generally, negative externalities result in a. too much of a good being produced. b. the socially optimal output of a good being produced. c. too little of a good being produced. d. either a or c e. any of the […]

Exhibit 38-4 If the closing price of Black Motor’s stock on the previous day was $76.95, what value goes in blank (C)? a. +1.95 b. -1.95 c. +0.95 d. -0.95 e. There is not enough information given to answer this […]

Which of the following statements is false? a. The monopolist has the ability to control to some degree the price of the product it sells. b. The monopolist faces a downward-sloping demand curve. c. The monopolist is a price taker. […]

Suppose an industry is made up of 16 firms. Three firms each sell 12 percent of the industry’s total output; another three firms each sell 8 percent; another five firms each sell 5 percent; and the last five firms each […]

Exhibit 39-2 If P1 is a price support, the quantity of wheat purchased by the government would be equal to a. Q0 – Q1. b. Q2 – Q1. c. Q2 – Q0. d. Q2. e. Q1. The author of the […]

There are more white persons in the United States living below the poverty line than African- American persons living below the poverty line. a. True b. False Which of the following is not one of the four broad categories of […]

Exhibit 24-1 If the product is produced under single-price monopoly, what do profits equal at the profit maximizing level of output? a. area 0P1BQ1 b. area BCA c. area P1P2CB d. area P2CAP1 e. none of the above If fewer […]

If the relative price of one unit of good Y is 0.25 units of good Z, then it follows that the absolute price of good Z can be __________ and the absolute price of good Y can be __________. a. […]

If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about the resulting changes in equilibrium price and quantity? a. The price will increase, but the quantity […]

A vertical supply curve of a factor indicates that a. the demand for the factor will vary directly with the price of the factor. b. the supply of the factor is perfectly elastic. c. the factor has zero opportunity cost. […]

Exhibit 34-3 The world price is PW. If a tariff is imposed, the price rises to PW + T. Because of the tariff, government collects tariff revenues equal to the area of a. 1. b. 1 + 2. c. 3. […]

Why must profits be zero in long-run competitive equilibrium? a. If profits are not zero, firms will enter or exit the industry. b. If profits are not zero, firms will produce higher-quality goods. c. If profits are not zero, marginal […]

Assume a decreasing-cost industry that is initially in long-run competitive equilibrium. A decrease in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________,which, […]

If a person’s income and the prices of both goods all rise by the same percentage, then her budget constraint a. moves inward toward the origin, and its slope remains the same. b. moves outward away from the origin, and […]

According to economists, competition exists because of a. scarcity. b. capitalism. c. money. d. unintended effects. Ceteris paribus means a. one variable too many. b. the correct relationship specified. c. assuming economic motives. d. all other things held constant or […]

Consumers will pay the full tax that is placed on the sellers of a good if demand is __________ or supply is __________. a. perfectly inelastic; perfectly inelastic b. elastic; inelastic c. perfectly inelastic; unit elastic d. perfectly elastic; perfectly […]

For a perfectly competitive firm, a decrease in the price of the product it sells will shift a. the demand curve of its product to the left. b. the demand curve of its product to the right. c. its MRP […]

One example of an optimal currency area is the states within the United States. a. True b. False Exhibit 28-10 If the firm in the exhibit is a monopsony, then the curve represented by the number 1 is its a. […]

Amy’s opportunity cost of going to the movies is a. the price of the ticket. b. zero, if she has a free pass to the movie. c. the price of the ticket plus the value to Amy of what she […]

The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost. a. True b. False Based on the data provided in this table,if these data were plotted in a two-variable diagram the result would […]

Increased productivity in the agricultural sector is not always a benefit to farmers because it is accompanied by a. lower prices and if demand is inelastic, lower prices mean lower revenues. b. higher prices and if demand is elastic, higher […]

It is impossible for a given good to be both elastic in demand and inelastic in supply. a. True b. False Exhibit 2-6 Which graph depicts the result of an increase in the number of illegal immigrants entering the country? […]

If you have a low rate of time preference, then you a. buy goods right now because “you just can’t wait.” b. are willing to save a larger percentage of your income than a person who has a high rate […]

Which of the following is a possible rationing device? a. dollar price b. first-come-first-served c. brute force d. a and b e. a, b, and c The quantity demanded of loanable funds is inversely related to the rate of interest. […]

One can determine producers’ surplus if the minimum selling price and the _____________ are known. a. price received b. price paid c. tax paid d. tax received e. a and c Exhibit 2-5 The opportunity cost of moving from point […]

A monopolistic competitive firm is a price taker, while an oligopolist is a price searcher. a. True b. False Involuntary transfers are the type of transfers used in the case against government. a. True b. False Answer: True The law […]

A labor union undertakes a training program for its members. The objective of the training program is to a. increase substitute factor prices. b. increase the marginal physical product of its members and therefore increase the demand for their services. […]

The absence of value judgments is the essence of a. normative economics. b. positive economics. c. microeconomics. d. macroeconomics. Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health […]

A positive externality is internalized when a. demand shifts to the right until the socially optimum level of output is obtained. b. demand shifts to the left until the socially optimum level of production is obtained. c. supply shifts to […]

If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is a. a downward-sloping curve that is bowed outward. b. a downward-sloping curve that is bowed inward. c. a downward-sloping straight […]

The act which empowered the Federal Trade Commission to deal with false and deceptive acts or practices was the a. Wheeler-Lea Act. b. Federal Trade Commission Act. c. Robinson-Patman Act. d. Sherman Act. e. Clayton Act. At the minimum wage […]

Situation 32-1 In the early 1980s, the U.S. automobile industry managed to influence the government to negotiate a voluntary export restraint agreement with Japan that was in effect from 1981 until 1985. The predictable result was an average increase in […]

Marginal cost regulatory pricing turns out to be the same as output regulation (for a natural monopoly firm) if the output level set by government is the a. amount at which marginal cost equals average total cost. b. resource-allocative efficient […]

Which of the following statements is false? a. For the monopsonist, marginal factor cost decreases as it buys additional units of a factor. b. For the monopsonist, the supply curve of the factor it buys is different from the marginal […]

If the LRATC curve is falling, then a. the law of diminishing marginal returns is operating. b. economies of scale are present. c. constant returns to scale are present. d. diseconomies of scale are present. Points inside (below) the production […]

When marginal private cost is less than marginal social cost, a. a public good exists. b. a negative externality exists. c. a positive externality exists. d. negative economic profits are made. e. a and d Which of the following statements […]

A production possibilities frontier separates an attainable region from an unattainable region. a. True b. False Economic profit is the difference between total revenue and implicit costs. a. True b. False Answer: False Exhibit 28-10 Answer: True If the firm […]

Is it possible for a perfectly competitive firm to be maximizing profits, but not achieving resource allocative efficiency? a. Definitely yes, because it is impossible to achieve both at the same time. b. Yes, it is possible, but it is […]

Exhibit 2-6 Which graph depicts society’s choice to produce more of good X and less of good Y? a. (1) b. (2) c. (3) d. (4) e. none of the above The higher the opportunity cost of doing something, the […]

Within the production possibilities frontier (PPF) framework, choice is depicted by the a. PPF itself. b. PPF being bowed outward. c. need to select among the points making up the PPF. d. straight-line PPF. Jaime has an old car that […]

Exhibit 20-3 When price decreases from $4.50 to $3.50, the price elasticity of demand is a. 0.4375. b. 0.50. c. 1.0. d. 2.00. e. 2.86. During the twentieth century, the U.S. farm sector experienced a. large increases in its ability […]

People sometimes act differently in different settings.An economist is likely to explain this by saying a. the benefits and costs of certain behaviors can be different in different settings. b. people are hard to figure out. c. people behave as […]

Tiffany gives $50 to Jeremy for his birthday.This is an example of a(n) a. involuntary transfer. b. involuntary-voluntary transfer. c. voluntary transfer. d. gift. e. c and d If the marginal productivity of labor is falling, it follows that a. […]

For a perfectly competitive firm, profit maximization (or loss minimization) occurs at the level of output at which a. MR = MC. b. MR = AVC. c. P = ATC. d. MR = ATC. The vertical distance between the AVC […]

A price floor creates a situation in which one party wins and another party loses, and the gains for the winner are equal to the losses for the loser. a. True b. False Exhibit 22-12 above. The numbers that go […]

Special interest groups a. often gain from public policies that may not be in accord with the interests of the general public. b. never gain from public policies that are not in accord with the interests of the general public. […]

When it comes to voting in a presidential election, we would expect, ceteris paribus, a. a lower percentage of eligible voters will vote if the weather is bad and this makes it harder to get to the polls on election […]

According to the median voter model, a candidate (in a two-person race) is more likely to label himself or herself a “middle-of-the-roader” than a conservative or liberal because a. the terms “conservative” and “liberal” are offensive to many people in […]

Moral hazard occurs when the parties on once side of the market, who have information not known to others, self select in a way that adversely affects the parties on the other side of the market. a. True b. False […]

Pure economic rent exists only when a. opportunity costs are negative. b. opportunity costs are zero. c. opportunity costs are positive. d. explicit costs are zero. e. b and d The upward-sloping supply of loanable funds curve assumes that a. […]

Exhibit 2-6 Which graph depicts a technological breakthrough in the production of good Y only? a. (1) b. (2) c. (3) d. (4) e. none of the above If income elasticity of demand for food is 1.55 it follows that […]

One of the key characteristics of oligopoly is that a. firms are independent of each other. b. firms face different cost conditions. c. each firm is aware that its actions will influence other firms and that the actions of the […]

Exhibit 39-2 If P1 is a price support, the quantity of wheat purchased by the market would be equal to a. Q2. b. Q0. c. Q1. d. Q2 – Q1. e. Q1 – Q0. A person buys a bond with […]

Exhibit 34-1 The opportunity cost of one unit of Y in country A is a. 1 unit of X. b. 0.75 units of X. c. 2 units of X. d. 10 units of X. Which of the following statements is […]

Alexander Hamilton used the infant-industry argument to support trade restrictions. a. True b. False As the price of a product rises the product will become more elastic in demand, assuming that the demand curve for the product is a downward-sloping […]

Exhibit 3-6 If D1 is the relevant demand curve, a decrease in the price of good X may cause a. demand to shift from D1 to D2. b. demand to shift from D1 to D3. c. a movement along D1 […]

Price discrimination was deemed illegal by the a. Sherman Act. b. Wheeler-Lea Act. c. Clayton Act. d. Federal Trade Commission Act. e. none of the above Exhibit 28-7 As the firm increases employment from 50 to 60 workers, by how […]

Marginal productivity theory implies that a worker will be paid an amount a. equal to his or her contribution to the productive process. b. less than his or her contribution to the productive process. c. greater than his or her […]

Exhibit 2-1 A movement from point B to point D a. could only happen through economic growth. b. is necessarily a movement from a productive efficient point to a productive inefficient point. c. isa movement from a productive efficient point […]

The owner of a firm signs a binding one-year lease on a factory for $10,000 rent a month and pays the first month’s rent. The $10,000 rent is a. a fixed cost but not a sunk cost. b. a sunk […]

As a determinant of a person’s income, luck is more important in the __________ run, as continuous reoccurrences of one kind of luck are __________. a. short; likely b. short; unlikely c. long; likely d. long; unlikely A Broadway play […]

Exhibit 21-7 For graph (1), if the price of X is $20, the price of Y is a. $10. b. $40. c. $80. d. $100. e. $160. Exhibit 20-5 Answer: b For graph (1), what is the price elasticity of […]

The sale of goods abroad at a price below their cost and below the price charged in the domestic market is called a. priming. b. coping. c. invading. d. dumping. Suppose a consumer is purchasing Coke (c) and pretzels (p) […]

Which of the following is false? a. Even if a corporation is not currently issuing bonds, you could still buy a bond directly from the corporation. b. Bonds that are rated AAA from Standard and Poor’s have received the highest […]

The existence of a third party in the medical care market separates the buying of medical care from the paying for medical care. a. True b. False Exhibit 28-7 As the firm increases employment from 30 to 40 workers, its […]

Some economic studies have shown that mandatory seat belt laws do not lead to a reduction in traffic fatalities. a. True b. False If a positive externality exists, __________ for the socially optimal output to be reached. a. supply needs […]

In general, all markets equilibrate at the same speed. a. True b. False Which of the following statements is true? a. In the short run, there are no fixed costs, only variable costs. b. In the short run, there are […]

Exhibit 24-8 Assuming that total fixed costs are $80, the average variable cost of producing 5 units of output is a. $34.40. b. $50.40. c. $10.67. d. $38.67. e. There is not enough information given to answer this question. A […]

By looking at the different slices of a pie chart, and comparing one slice to another, it is possible to quickly estimate a. relative relationships. b. absolute relationships. c. the slope of a line. d. the slope of a curve. […]

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 30, 50, 65, 72, respectively. In this situation we have __________ marginal utility, which […]

You paid $25 for your ticket to the football game, only to see your favorite team losing 28-0 at the end of the first quarter. That $25 should now be regarded as a(n) __________ cost that economists say should be […]

Maximizing total revenue turns out to be the same as maximizing profit only when a. average fixed cost declines continually as output rises. b. a firm has no fixed costs. c. a firm has no variable costs. d. a firm […]

There is currently a price ceiling in the market for transplanted kidneys, which has helped to create a shortage of transplanted kidneys. a. True b. False Positive economics is concerned with a. value judgments. b. cause-effect relationships. c. observations that […]

Michelle can work at job A earning $50,000 a year, job B earning $83,000 a year, or job C earning $85,000 a year. If Michelle chooses job C, then her economic rent for working at job C rather than job […]

The marginal productivity theory states that a. as variable inputs are added to a fixed quantity of other inputs eventually the additional output produced by each additional variable input will decrease. b. inputs will be used most efficiently when the […]

The law of diminishing marginal utility says that a. the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases. b. the more of a particular good one consumes, the greater is […]

Exhibit 22-2 The dollar amounts that go in blanks (C) and (D), respectively, are a. $10.00 and $1.00. b. $30.00 and $34.00. c. $3.00 and $4.00. d. $6.67 and $10.00. e. $1.00 and $1.50. “Pure economic rent” is a payment […]

The Wheeler-Lea Act of 1938 was designed to close the merger loophole that remained in the Clayton Act. a. True b. False Which of the following is not a prediction of the theory on baseball caps and cheating? a. More […]

In order for a firm to earn economic profits, price must exceed average total cost. a. True b. False The national defense argument for trade protectionism holds that a. what is good for business is good for the country. b. […]

Dan is currently consuming 10 Cokes and 5 slices of pizza per week such that the marginal utility of the tenth Coke is 12 utils and that of the fifth slice of pizza is also 12 utils. How should Dan […]

Accounting profit equals economic profit if __________ equals __________. a. explicit costs; implicit costs b. total revenue; marginal cost c. implicit costs; zero d. explicit costs; zero e. unit cost; marginal cost Which of the following statements is true? a. […]

Unlike a monopoly, a monopolistic competitive firm in long run equilibrium is likely to produce a level of output at which a. MR = MC. b. P > MC. c. P = ATC. d. resource-allocative efficiency is achieved. In the […]

Exhibit 34-4 The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2. a. 20B; 15B b. 2B; 1B c. 40B; 15B d. 1/2B; 1B e. 1/20B; 1/15B If society is experiencing […]

If the student whose marginal benefits and costs of good health are noted in this table, how many units of good health should the student obtain in order to maximize her net benefits of good health? a. 2 units b. […]

As presented in the textbook, research on neuroeconomics has shown that when individuals are presented with present-future choices the a. analytic system (which weights the future heavily) seems to win out over the limbic system (which weights the present heavily). […]

Exhibit 34-7 Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good X).Americans purchase ______ units of good X from U.S. producers and import _______ units of good X from abroad. […]

Exhibit 25-10 Suppose that the letter grade earned on a test for each student in a class depends upon how well he/she does relative to other students in the class.This exhibit shows a prisoner’s dilemma setting for two representative students […]

Exhibit 20-7 Which of the graphs shows a perfectly elastic demand curve? a. (1) b. (2) c. (3) and (4) d. none of the above Exhibit 23-8 What is the profit (loss) of firm B at the profit-maximizing (or loss-minimizing) […]

Exhibit 24-9 The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because a. its total costs rise as more output is produced and sold. b. it has to lower […]

One point on a market supply curve represents $4 and 100 units quantity supplied. If there are three suppliers, and at a price of $4 one of the suppliers supplies 23 units, then which of the following combinations of price […]

The law of diminishing marginal returns a. is a short run concept. b. is a long run concept. c. is both a short run and a long run concept. d. does not hold in the real world. If government regulators […]

When a monopolist can perfectly price discriminate, it follows that a. price equals marginal revenue. b. price equals marginal cost at the quantity of output it chooses to produce. c. the monopolist is resource-allocative efficient. d. b and c e. […]

A nonexcludable public good is characterized by nonrivalry in a. production and nonexcludability. b. consumption and rivalry in production. c. consumption and excludability. d. consumption and nonexcludability. e. none of the above When the government imposes taxes on firms that […]

A good provides __________ and a bad provides __________. a. utility; satisfaction b. disutility; utility c. dissatisfaction; satisfaction d. utility; disutility e. satisfaction; utility The gap between the higher equilibrium tuition and lower student tuition is $4,000 at university A […]

Exhibit 1-2 According to the data provided in this table, what is the slope of the line between points A and B, if these data were graphed with X on the horizontal axis and Y on the vertical axis? a. […]

What value goes in blank (B)? a. 27 b. 38 c. 40 d. 35 e. There is not enough information to answer this question. Unlike in the 1930’s, farmers today can insure themselves against price swings that would impact them […]

Exhibit 27-5 Marginal physical product of the fourth unit of labor a. equals 60. b. equals 40. c. equals 24. d. equals 310. e. cannot be determined. One of the conditions necessary for price discrimination is that the seller be […]

If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost curves, then a. the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm will not. b. the perfectly competitive firm will […]

At a price for which the quantity supplied exceeds the quantity demanded, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. surplus; downward b. surplus; upward c. shortage; downward d. shortage; upward Exhibit 28-4 If […]

If the bid value of a Treasury bond is listed as €112:16€, it means that the buyer is willing to pay $1,125 for the bond. a. True b. False When productivity increases in the production of agricultural products, the supply […]

For a price taker, market equilibrium price is $100. At 50 units, MR = MC, ATC = $80, and AVC = $70. This price taker will a. earn $100 profits if it produces 50 units of the good. b. earn […]

A price searcher is a. a person who actively seeks out the best price for a product that he or she wishes to buy. b. a firm that seeks out buyers who are willing to pay the price that the […]

If total revenue rises as a result of a decrease in the price of a given good, it follows that demand is a. inelastic. b. perfectly inelastic. c. elastic. d. unit elastic. e. none of the above Union training programs […]

Why is bad weather sometimes good news for farmers? a. Bad weather shifts the supply curve of agricultural products leftward, driving up price and total revenue (assuming demand is inelastic). b. Bad weather shifts the supply curve of agricultural products […]

The longer the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand. a. lower, price b. lower, income c. higher, price d. higher, income The demand for farm goods is income inelastic […]

Exhibit 34-1 The opportunity cost of one unit of Y in country B is a. 0.5 units of X. b. 1 unit of X. c. 2 units of X. d. 20 units of X. A firm produces the quantity of […]

Which of the following is false? a. For bond buyers, the higher the yield the better it is for them. b. For bond buyers, the higher the price of the bond the better it is for them. c. For bond […]

If an economist says “the higher the price of oranges, the fewer oranges individuals will buy, ceteris paribus,” this means that a. individuals don’t like high-priced oranges. b. as the price of oranges rises, individuals’ preferences change and they no […]

A person goes into a store and buys a computer for $1,210. In this case, price is acting as a a. resource. b. good. c. rationing device. d. capital instrument. e. factor of production. Which of the following statements is […]