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Table 11-2 In Table 11-2, the price at the profit-maximizing output is how much? a. $15 b. $7 c. $10 d. $11 The income of Lebron James, for example, is determined by a. the position of the demand curve. b. […]

If marginal utility is a positive number: a. the more you purchase, the more total utility you get b. the more you purchase, the less total utility you get c. utility is not affected by more purchases d. none of […]

The slope of a demand curve is almost always a. positive, because when people buy more of a good the cost of producing it will rise. b. positive, because the more money a person has, the more of a particular […]

Charging firms that emit pollutants is one way to deal with pollution. a. True b. False The principle of comparative advantage helps explain trade between nations. a. True b. False Answer: True A common misconception about supply is that a. […]

Spending on R&D among a group of firms is equally likely to increase or to decrease. a. True b. False A Detroit business advertises, “The more we sell, the lower the price, and the lower the price, the more we […]

The lowest-income fifth of the population ordinarily earns about 20 percent of the income in the United States. a. True b. False After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between […]

If a tax is proportional, the average tax rate a. remains the same as income rises. b. rises as income rises. c. falls as income rises. d. falls as income falls. A market transaction causes an externality if someone a. […]

The demand for capital is a. directly related to the interest rate. b. inversely related to the interest rate. c. unrelated to the interest rate. d. first falls, and then rises, in relation to the interest rate. All large firms […]

Statistical studies in the United States have reached the conclusion that for low-income workers a. the substitution effect is greater than the income effect. b. the income effect is greater than the substitution effect. c. the income effect is about […]

A profit-maximizing monopolist will stop production while MR is still greater than MC. a. True b. False In a free market, a given unit of an input will be used by the firm that a. earns the largest addition to […]

In discussing trade, it is ____ that matters rather than ____. a. absolute advantage: elastic advantage b. comparative advantage; absolute advantage c. entire advantage; comparative advantage d. elastic advantage; entire advantage e. declarative advantage; absolute advantage If the production possibilities […]

Which of the following could be called a virtue of raising prices of depletable resources? a. It would discourage consumption and waste. b. It would stimulate more efficient use of resources. c. It would encourage innovation and discovery of alternatives. […]

A graph with a positive slope indicates that the variables depicted on the axes move in the same directions. a. True b. False A tax is more likely to promote economic equality if it is a. regressive. b. proportional. c. […]

Profits a. are what remains from the selling price after factors have been paid. b. accrue to entrepreneurs. c. are lower than most people think. d. All of the above are correct. A lottery promises a $250,000 prize. But the […]

Displayed below is the payoff matrix of firm A for four different strategies, A1, A2, A3, and A4, and the potential retaliatory responses of firm B (B1, B2, B3, B4). Table 12-1 If firm A uses the maximin criterion, which […]

The slope of the budget line is determined only by the prices of the commodities purchased. a. True b. False Sales maximization may be a goal of a firm if a. firms are managed by irrational persons. b. the firm […]

Economists probably agree more often than they disagree. a. True b. False A monopolist is best described as a price a. taker. b. searcher. c. maker. d. follower. Answer: c Colombia produces coffee with less labor and land than any […]

The demand for French Roast coffee is likely to be a. elastic. b. inelastic. c. unit elastic. d. perfectly inelastic. Government action can usually perfectly correct the market’s shortcomings. a. True b. False Answer: False “Rent seeking” describes the search […]

If the U.S. government decides to increase military spending, one opportunity cost will be lower spending on education. a. True b. False If the equilibrium rate of interest would be 10 percent, but the usury law sets 8 percent, a. […]

Many experts on the nursing shortage insist that, in addition to higher money wages, other ways will have to be found to make the nursing profession more attractive, including, for example, more respect from physicians and administrators, more flexible schedules, […]

Economists can evaluate the desirability of the distribution of income. a. True b. False A concentration ratio provides a better assessment of market power than the Herfindahl-Hirschman index does. a. True b. False Answer: False In labor markets, risk taking […]

The corporate income tax is the single largest source of revenue for the federal government. a. True b. False A monopolistic competitor can expect to earn an economic profit in the long run. a. True b. False Answer: False Recently, […]

Examples of indirect taxes are a. income taxes levied by some states. b. sales taxes and property taxes. c. poll taxes. d. corporate profits taxes. What is the present value of an infinite stream of annual payments of $10,000 per […]

In 2013 ____ of national factor income consisted of employee compensation. a. 90 percent b. 50 percent c. 60 percent d. 70 percent What is a key criterion involved in deciding a natural monopoly? a. Size of the firm relative […]

Points along a budget line represent the maximum combinations of two commodities that a consumer can afford. a. True b. False Employers can shift payroll taxes by substituting capital for labor. a. True b. False Answer: True Figure 7-14 Of […]

Part I/Lecture Notes PART I LECTURE NOTES © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or […]

Chapter 1/What Is Economics? PART II SOLUTIONS © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or […]

Chapter 10/The Firm and the Industry under Perfect Competition CHAPTER 10 THE FIRM AND THE INDUSTRY UNDER PERFECT COMPETITION TEST YOURSELF 1.Under what circumstances might you expect the demand curve of the firm to be a. Vertical? b. Horizontal? c. […]

Chapter 10/The Firm and the Industry under Perfect Competition CHAPTER 10 THE FIRM AND THE INDUSTRY UNDER PERFECT COMPETITION Chapter 10 develops the model of the perfectly competitive firm and the perfectly competitive industry. It stresses the zero profit condition […]

Chapter 11/Monopoly CHAPTER 11 MONOPOLY Chapter 11 presents the basic structure of a monopoly. Like perfect competition, monopoly is a polar case, of which real-world examples are difficult to find. It needs to be studied because it is CHAPTER OUTLINE […]

Chapter 11/Monopoly CHAPTER 11 MONOPOLY TEST YOURSELF 1. Which of the following industries are pure monopolies? a. The only supplier of heating fuel in an isolated town b. The only supplier of IBM notebook computers in town c. The only […]

Chapter 12/Between Competition and Monopoly CHAPTER 12 BETWEEN COMPETITION AND MONOPOLY TEST YOURSELF 1. Using game theory, set up a payoff matrix similar to one that Volkswagen’s management might employ in analyzing the problem presented in Discussion Question 5. The […]

Chapter 12/Between Competition and Monopoly CHAPTER 12 BETWEEN COMPETITION AND MONOPOLY This chapter deals with monopolistic competition and oligopoly, the market forms that lie between the two polar cases of perfect competition and monopoly. It is here that the great […]

PROBLEMS 1. In the beach city of Santa Barbara, California, there are seven bathing suit stores, each with the same schedule of costs and each facing an identical demand curve. Swim N Style is a typical store: Suits sold (per […]

Chapter 13/Limiting Market Power: Regulation and Antitrust CHAPTER 13 LIMITING MARKET POWER: REGULATION AND ANTITRUST DISCUSSION QUESTIONS 1. Why is an electric company in a city often considered to be a natural monopoly? What would happen if two competing electric […]

Chapter 13/Limiting Market Power: Regulation and Antitrust CHAPTER 13 LIMITING MARKET POWER: REGULATION AND ANTITRUST Part 1 of Chapter 13 deals with the regulation of firm and the other principal tool the government has to confront the problem of excessive […]

Chapter 14/The Case for Free Markets: The Price System CHAPTER 14 THE CASE FOR FREE MARKETS: THE PRICE SYSTEM TEST YOURSELF 1. What possible social advantages of price increases arise in the following cases? a. Charging higher prices for electrical […]

Chapter 14/The Case for Free Markets: The Price System CHAPTER 14 THE CASE FOR FREE MARKETS: THE PRICE SYSTEM Chapter 14 shows how the market system can solve the enormously complex coordination problems of an economy, and do so efficiently. […]

Chapter 15/The Shortcomings of Free Markets CHAPTER 15 THE SHORTCOMINGS OF FREE MARKETS TEST YOURSELF 1. What is the opportunity cost to society of a 100-mile truck trip? Why may the price of the gasoline used by the truck not […]

Chapter 15/The Shortcomings of Free Markets CHAPTER 15 THE SHORTCOMINGS OF FREE MARKETS Chapter 15 deals in a comprehensive way with a series of market failures. It is the complement to Chapter 14, which extolled the virtues of free markets; […]

Chapter 16/Externalities, the Environment, and Natural Resources CHAPTER 16 EXTERNALITIES, THE ENVIRONMENT, AND NATURAL RESOURCES The principal theme of Chapter 16 is that some simple economic principles can help us to CHAPTER OUTLINE PART 1: THE ECONOMICS OF ENVIRONMENTAL PROTECTION […]

Chapter 16/Externalities, the Environment, and Natural Resources PROBLEMS 1. Muddy Manufacturing finds it convenient to discharge some of its waste into nearby Crystal River, upstream from the town of Midville. Authorities in Midville estimate that each pound of waste costs […]

Chapter 16/Externalities, the Environment, and Natural Resources CHAPTER 16 EXTERNALITIES, THE ENVIRONMENT, AND NATURAL RESOURCES TEST YOURSELF 1. Production of Commodity X creates 10 pounds of emissions for every unit of X produced. The demand and supply curves for X […]

Chapter 17/Taxation and Resource Allocation CHAPTER 17 TAXATION AND RESOURCE ALLOCATION Chapter 17 begins by describing the U.S. tax structure, and then analyzes it in terms of equity, efficiency, excess burden, and incidence. It deals with several current controversies in […]

PROBLEMS 1. The gasoline excise tax is an example of a benefit tax: people who use the highways pay for their upkeep through the tax. In what ways does the gasoline tax meet or fail to meet the criteria of […]

Chapter 17/Taxation and Resource Allocation CHAPTER 17 TAXATION AND RESOURCE ALLOCATION TEST YOURSELF 1. Using the following hypothetical income-tax table, compute the marginal and average tax rates. Is the tax progressive, proportional, or regressive? Income Income Tax $20,000 $2,000 30,000 […]

Chapter 18/Pricing the Factors of Production CHAPTER 18 PRICING THE FACTORS OF PRODUCTION The discussion of income distribution begins with this chapter. The chapter first outlines the general theory of factor pricing, that is to say, supply and demand, with […]

Chapter 18/Pricing the Factors of Production CHAPTER 18 PRICING THE FACTORS OF PRODUCTION TEST YOURSELF 1. Which of the following inputs do you think include relatively large economic rents in their earnings? a. Nuts and bolts b. Petroleum c. A […]

Chapter 19/Labor and Entrepreneurship: The Human Inputs CHAPTER 19 LABOR AND ENTREPRENEURSHIP: THE HUMAN INPUTS TEST YOURSELF 1. The following table shows the number of pizzas that can be produced by a large pizza parlor employing various numbers of pizza […]

Chapter 19/Labor and Entrepreneurship: The Human Inputs CHAPTER 19 LABOR AND ENTREPRENEURSHIP: THE HUMAN INPUTS Chapter 19 is an introduction to the principal issues in modern labor economics. It is divided into two main sections: the markets for labor and […]

Chapter 2/The Economy: Myth and Reality CHAPTER 2 THE ECONOMY: MYTH AND REALITY DISCUSSION QUESTIONS 1. Which is the biggest national economy on earth? Why has it remained bigger than other countries with much larger labor forces or those with […]

Chapter 2/The Economy: Myth and Reality CHAPTER 2 THE ECONOMY: MYTH AND REALITY Chapter 2 introduces students to some of the key characteristics of the U.S. economy. This chapter also defines the meaning of input and output, and how businesses, […]

Chapter 20/Poverty, Inequality, and Discrimination CHAPTER 20 POVERTY, INEQUALITY, AND DISCRIMINATION Chapter 20 begins with a survey of the basic facts of poverty and income distribution in the United States. It then turns to explanations of differences in incomes and […]

Chapter 20/Poverty, Inequality, and Discrimination CHAPTER 20 POVERTY, INEQUALITY, AND DISCRIMINATION TEST QUESTIONS 1. Define the poverty rate. Does it rise or fall during recessions? 2. Since the official poverty line was set at $3,000 in 1964, prices have risen […]

Chapter 21/Is U.S. Economic Leadership Threatened? CHAPTER 21 IS U.S. ECONOMIC LEADERSHIP THREATENED? TEST YOURSELF 1. In what ways is the United States still an economic leader in the world? In what ways has it fallen behind other nations? The […]

Chapter 21/Is U.S. Economic Leadership Threatened? CHAPTER 21 IS U.S. ECONOMIC LEADERSHIP THREATENED? Chapter 21 recognizes that is some respects, the United States has fallen significantly behind other nations. It analyzes key economic factors, like innovation, education, health care, and […]

Chapter 22/International Trade and Comparative Advantage CHAPTER 22 INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE This chapter introduces students to the principles of international trade. It outlines the Ricardian doctrine of comparative advantage, showing that trade is to the advantage of both […]

Chapter 22/International Trade and Comparative Advantage CHAPTER 22 INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE TEST YOURSELF 1. The following table describes the number of yards of cloth and barrels of wine that can be produced with a week’s worth of labor […]

Chapter 3/The Fundamental Economic Problem: Scarcity and Choice CHAPTER 3 THE FUNDAMENTAL ECONOMIC PROBLEM: SCARCITY AND CHOICE This chapter introduces some of the most central concepts in economics: scarcity, opportunity cost, efficiency, division of labor, and exchange. It deals with […]

Chapter 3/The Fundamental Economic Problem: Scarcity and Choice CHAPTER 3 THE FUNDAMENTAL ECONOMIC PROBLEM: SCARCITY AND CHOICE TEST YOURSELF 1. A person rents a house for $24,000 per year. The house can be purchased for $200,000, and the tenant has […]

Chapter 4/Supply and Demand: An Initial Look CHAPTER 4 SUPPLY AND DEMAND: AN INITIAL LOOK TEST YOURSELF 1. What shapes would you expect for the following demand curves? a. A medicine that means life or death for a patient b. […]

Chapter 4/Supply and Demand: An Initial Look CHAPTER 4 SUPPLY AND DEMAND: AN INITIAL LOOK Chapter 4 introduces students to the basic analytical structure of markets, through the use of the supply-demand diagram. It then indicates what sorts of problems […]

Chapter 5/Consumer Choice: Individual and Market Demand CHAPTER 5 CONSUMER CHOICE: INDIVIDUAL AND MARKET DEMAND Chapter 5 goes behind the market demand curve of Chapter 4 to show how it is based on the preferences of individual consumers. The text […]

Chapter 5/Consumer Choice: Individual and Market Demand CHAPTER 5 CONSUMER CHOICE: INDIVIDUAL AND MARKET DEMAND TEST YOURSELF 1. Which gives you greater total utility: 14 gallons of water per day or 22 gallons per day? Why? 2. At which level […]

Chapter 6/Demand and Elasticity CHAPTER 6 DEMAND AND ELASTICITY The principal subject of the chapter is the price elasticity of demand, introduced first by considering a problem: Will taxing cigarettes make teenagers stop smoking? By the end of the chapter […]

Chapter 6/Demand and Elasticity CHAPTER 6 DEMAND AND ELASTICITY TEST YOURSELF 1. What variables other than price and advertising are likely to affect the quantity demanded of a product? The answer depends upon the product, but general variables include tastes, […]

CHAPTER 7 PRODUCTION, INPUTS, AND COST: BUILDING BLOCKS FOR SUPPLY ANALYSIS Chapter 7 introduces students to the various concepts of cost used in analyzing the behavior of firms. The chapter is divided into two principal sections: first, the case of […]

Chapter 7/Production, Inputs, and Costs: Building Blocks for Supply Analysis CHAPTER 7 PRODUCTION, INPUTS, AND COSTS: BUILDING BLOCKS FOR SUPPLY ANALYSIS TEST YOURSELF 1. A firm’s total fixed cost is $360,000. Construct a table of its total and average fixed […]

PROBLEMS 1. Pohl Manufacturing Company finds that as it increases the number of workers it hires, the number of hockey pucks produced daily changes as follows: Workers Hockey Pucks 1 10 2 30 3 60 4 100 5 135 6 […]

Chapter 8/Output, Price, and Prot: The Importance of Marginal Analysis CHAPTER 8 OUTPUT, PRICE, AND PROFIT: THE IMPORTANCE OF MARGINAL ANALYSIS TEST YOURSELF 1. Suppose that the firm’s demand curve indicates that at a price of $10 per unit, customers […]

Chapter 8/Output, Price, and Prot: The Importance of Marginal Analysis CHAPTER 8 OUTPUT, PRICE, AND PROFIT: THE IMPORTANCE OF MARGINAL ANALYSIS This chapter analyzes the output and price decisions of firms, using the concepts of marginal cost CHAPTER OUTLINE PRICE […]

Chapter 9/Securities, Business Finance, and the Economy: The Tail that Wags the Dog? CHAPTER 9 SECURITIES, BUSINESS FINANCE, AND THE ECONOMY: THE TAIL THAT WAGS THE DOG? Until now, the firm has been treated as a profit-maximizing black box. Chapter […]

Chapter 9/Securities, Business Finance, and the Economy: The Tail that Wags the Dog? CHAPTER 9 SECURITIES, BUSINESS FINANCE, AND THE ECONOMY: THE TAIL THAT WAGS THE DOG? TEST YOURSELF 1. Suppose that interest rates are 6 percent in the economy […]

In the long run, a. both monopolists and perfectly competitive firms produce at minimum long-run average total cost. b. a monopolist will exit the industry if he is earning zero economic profit. c. a monopolist will always charge a higher […]

In early 1996, Congress proposed an agriculture bill that would gradually reduce price supports for many agricultural products. If the bill were to be approved, what would most likely happen to the number of families employed in agriculture? a. It […]

Figure 21-1 In Figure 21-1, a reform in the distribution system that achieves the same distribution with less damage to work incentives is represented by a move from which points? a. A to B b. C to G c. C […]

If the price falls below minimum SRAVC, the quantity supplied by the firm will be a. the quantity at minimum MC. b. zero. c. the quantity at the point where MC intersects AC. d. the quantity at minimum AC. The […]

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that a. the United States’ elasticity of demand for imported oil is greater than one. b. the United States’ elasticity of demand for imported oil is […]

Figure 7-7 In Figure 7-7 at 100 units, AVC equals a. 8. b. 800. c. 100. d. 1,000. The price of bonds is tied to the interest rate; when one goes up, the other must fall. a. True b. False […]

Capitalism is an economic system in which there is public ownership of the means of production and resource allocation is determined through markets. a. True b. False Unrestrained monopolies are criticized because they restrict output and reduce innovation. a. True […]

The owner of a garage makes large contributions to a politician who is seeking the office of state governor. If his candidate wins, he will get the contract, which now resides with a competitor, to repair State Police vehicles. This […]

The price system rations goods among consumers in such a way that a. all are treated equally. b. all needs are satisfied. c. the rich are favored. d. important needs are satisfied first. A production possibilities curve has a downward […]

Why does equilibrium in the market for a traded good not occur where that country’s quantity demanded equals quantity supplied? a. Because equilibrium occurs where demand equals supply. b. Because markets are never in equilibrium. c. Because some of the […]

Figure 20-4 In Figure 20-4, which panel depicts a union suffering unemployment during a recession rather than allowing the wage to fall? a. 1 b. 2 c. 3 d. 4 In the typical AC curve, the downward-sloping part is attributable […]

Marginal physical product measures the increase in total output that results from a one-unit increase in an input. a. True b. False Official data may overstate the extent of poverty because a. poverty is a relative as opposed to an […]

Corporate taxes are a direct tax. a. True b. False A firm’s total revenue is simply the price of its product multiplied by the quantity sold. a. True b. False Answer: True An upward-sloping supply curve shows that a. buyers […]

The maximin criterion can be defined as which of the following? a. One seeks the maximum of the minimum payoffs to the various available strategies. b. One seeks the minimum of the maximum losses among the various available strategies. c. […]

If demand is unit elastic, revenue a. and price rise and fall together. b. rises as price falls. c. falls as price rises. d. remains constant as price rises or falls. The price of one good produced by a multiproduct […]

The presence of large sunk costs often serves as a naturally imposed barrier to entry. a. True b. False How the price of a depletable resource changes over time depends on a. how the technology of resource extraction changes. b. […]

Consumer income changes can shift market demand. a. True b. False Payroll taxes are used to collect revenue for the Social Security program. a. True b. False Answer: True Which of the following is an advantage to the pollution-rights approach […]

The factor that leads to underpricing and overuse of an economic resource is a. human greed and selfishness. b. capital markets. c. the lack of an enforceable property right. d. the lack of understanding of pollution and its effects. Total […]

The most basic investigative tool of economics is the a. concept of scarcity. b. mechanism of supply and demand. c. coordination and trade syndrome. d. inflation-unemployment trade-off. e. regulation of business. For the typical student, taking an introductory course in […]

For a rational consumer, the consumer’s surplus will never be a negative number. a. True b. False Table 22-4 Table 22-4 presents the demand and supply schedules for television sets in Japan and the United States. If there is no […]

“Protection” is designed to help a. firms whose relative inefficiency does not permit successful competition with imports. b. workers who have very high productivity, and cannot survive against low-paid foreign workers. c. government that needs revenue from tariffs and quotas […]

At an equilibrium price, quantity demanded a. exceeds quantity supplied. b. equals quantity supplied. c. is less than quantity supplied. d. Any of the above is possible. Which of the following illustrates government acting as a referee? a. taxing high […]

If demand is elastic, an increase in price will increase total revenue. a. True b. False Under a regressive tax, the fraction of income paid in taxes a. rises as income rises. b. is unchanged as income changes. c. falls […]

If one country has an absolute advantage in every commodity, there is no reason for it to trade. a. True b. False Which of the following attitudes will be held by a typical firm in a typical cartel? a. If […]

The law of diminishing marginal utility holds that at some point consumption of additional units of a commodity adds less to total utility. a. True b. False Elasticity of demand is another way to measure slope. a. True b. False […]

Figure 3-2 In Figure 3-2, a point such as E a. is not obtainable. b. is an efficient use of resources. c. represents an inefficient allocation of resources. d. indicates that the society is a capitalist society. A firm will […]

The total amount of consumption of a society can be increased if a. firms allow each worker to perform multiple tasks. b. resources are allocated by a central planning group. c. individuals engage in specialization and voluntary trade. d. barter […]

At an equilibrium price for gasoline, a. everyone with the desire and the income to buy gasoline at that price can do so. b. surpluses are inevitable. c. inherent market forces will eventually change the quantities demanded and supplied. d. […]

A corporate bond sold in 2000 with a face value of $10,000, a $100 coupon, and a maturity date in 2010 a. will pay the bondholder $100 a year every year from 2000 to 2010 and will also pay him […]

The United States is a fairly good example of a. a mixed economy. b. a pure market system. c. a government-dominated economy. d. a manufacturing economy. e. a transitioning economy. The three major sources of economic profit are a. risk-bearing, […]

Taxes on polluting emissions are a. more efficient than direct controls. b. used by all economic societies. c. less effective than direct regulations. d. easily enforced through the criminal justice system. Fixed cost increases when output rises. a. True b. […]

Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other. a. True b. False The concept of poverty is culturally determined, and hence people are defined as “poor” in relation to […]

Comparative advantage is the rule that ordinarily prevents a nation from independently producing all of the goods it requires. a. True b. False At least two demand curves are present in an international equilibrium model. a. True b. False Answer: […]

The statement “Resources employed in producing X are better suited to making Y” is another way of saying a. the production possibilities frontier is “bowed out.” b. the production possibilities frontier is a straight line. c. the production possibilities frontier […]

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation. a. True b. False Figure 6-2 From Figure 6-2, we can infer that demand is ____ between P = 12 and P […]

Which of the following statements is equivalent to the law of diminishing marginal returns? a. A stitch in time saves nine. b. You can’t make an omelet without breaking eggs. c. Too many cooks spoil the broth. d. If you […]

In the short run, a. all of the firm’s input quantities, including plant size, become adjustable. b. firms are not constrained by past decisions. c. firms have relatively little opportunity to change production processes. d. all of the firm’s current […]

If the price elasticity of demand for radios is 2,5 (dropping the minus sign), then a 50 percent reduction in the price of radios will lead to a. the sale of 200 additional radios. b. the sale of 125 percent […]

Population density varies little between the fifty states. a. True b. False Which of the following quotations best captures the idea of opportunity cost? a. “Opportunity knocks but once.” b. “Every choice involves a sacrifice.” c. “Let’s not ask for […]

Economic theory is a necessity, not a luxury. This statement is true because theory a. always leads to practical and useful policy. b. can prevent depressions in the economy. c. substitutes for vast amounts of data. d. provides a structure […]

Which of the following is likely to affect the position and shape of society’s production possibilities frontier? a. volume of physical resources b. level of labor skills c. level of technology d. amount of factories on hand e. All of […]

An efficient distribution of goods requires that a. everyone gets an equal share of each good. b. marginal cost equal marginal utility for the last unit produced. c. each person derives the same total utility from the good. d. since […]

Figure 5-5 In Figure 5-5, if the household is spending enough of its budget to purchase 4 orders of fries and the price of an order of fries is $2, the remainder of the budget available for hamburgers is a. […]

As the term “opportunity cost” is defined in the text, the opportunity cost of going to college includes a. both tuition and the value of the student’s time. b. tuition but not the value of the student’s time, which is […]

Figure 22-9 In Figure 22-9, at price OC total quantity demanded exceeds quantity supplied and price will rise to a. OJ in Pastaland. b. OA in Pestoland. c. OA in both countries. d. OJ in both countries. Increasing productivity in […]

The major coordination tasks can be summarized with the questions a. who, what, when, where? b. how, what, for whom? c. how, what, why? d. how, why, for whom? e. who, how, what? Low interest rates will persuade corporations to […]

The invention of machinery that can double the amount of gold extracted from raw ore will likely lead mining companies to a. raise the world price of gold to pay for the new machinery. b. lower the world price of […]

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes. a. True b. False A bond’s price is sensitive to changes in a. the interest […]

Perfect central planning is nearly impossible for all of these reasons except: a. production processes between industries are often interdependent. b. some processes must be decided together, and not individually, because of their interdependence. c. if the output target for […]

Fixed prices in a free-market economy can increase efficiency. a. True b. False Figure 18-1 According to the graph in Figure 18-1, tax collections will be which of the following? a. 14 million b. 1,4 million c. 12 million d. […]

High interest rates make a firm’s long-term investment in new capital a. riskless. b. less attractive. c. more attractive. d. no more attractive than short-term investment. Any change in a firm’s fixed costs will change its profit-maximizing level of output. […]

Externalities affect only the buyer and seller involved in an exchange. a. True b. False Rising prices help control the process of resource depletion by a. discouraging consumption and waste. b. stimulating more efficient use of the depletable resource. c. […]

Recycling rates for aluminum, paper, and glass have been increasing in the United States. a. True b. False Annual incomes of James, Jack, and Stanley are $30,000, $50,000, and $80,000 and their tax rates are 10%, 20%, and 30% respectively. […]

The use of pollution charges to reduce pollution confronts the problem of a. free riders who avoid revealing benefits from abatement. b. determining specific individual damages and appropriate charges associated with pollutants. c. necessarily lowering the price of the products. […]

How does the U.S. economy rank in size? a. first in economic output b. second in economic output c. third in economic output d. fourth in economic output e. fifth in economic output One of the following is not a […]

Which of the following is true for a profit-maximizing competitive firm in the long run but not a monopolist? a. MC = MR b. MC = P c. AR = P d. Q > 0 A rise in price will […]

Price discrimination is always illegal. a. True b. False The external costs of cigarettes are related to the health problem smoking produces for both smokers and nonsmokers. One estimate places these costs at 29 cents per pack. Presently, sales and […]

Figure 11-9 In Figure 11-9, which of the following is true? a. MC = P b. MC = MR c. MU > MR d. MU < MC Zero economic profits for a perfectly competitive firm in the long run means […]

Dividend refers to a. a corporation’s regular payments to lenders. b. part of the revenue given to stockholders of a corporation. c. a lender’s legal claim on the assets of a bankrupt corporation. d. a prepayment of a corporation’s legal […]

Piketty’s analysis concludes that unequal ownership of capital, rather than unequal pay, is responsible for notably high levels of inequality in the decades since the 1980s. a. True b. False A firm will tend to select the least costly input […]

Is the monopolist supply decision more complicated than that of competitive supply? a. Yes, because the monopolist can choose its price, and the perfect competitor cannot. b. No, because they are both price takers. c. No, because the market determines […]

In a market economy, goods are allocated to a. all potential uses. b. all citizens on an equal basis. c. citizens with political power. d. citizens with both the desire and the willingness to pay for the goods. If the […]

An unregulated market economy provides material wealth, but does not generate effective control of environmental damage. a. True b. False If marginal profit is zero, then average profit is at a maximum. a. True b. False Answer: False When beneficial […]

Unemployment rates in the U.S. are generally: a. higher than in Europe b. lower than in Europe c. about the same asin Europe d. there are no unemployed in Europe Under a tying contract, a. the price a buyer must […]

A market society will always protect the natural environment. a. True b. False Table 5-1 Table 5-1 gives information on George’s total utility from consuming milkshakes and sandwiches. If George’s income this week is $15, milkshakes are $3 each, and […]

State and local governments typically spend most of their budgets on providing a. education. b. public goods. c. public welfare programs. d. police protection and administrative services. A market a. may be an organized exchange. b. refers to a set […]

Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor to be supplied at its present employment. a. True b. False A straight-line demand curve has the same elasticity […]

Poverty is defined in two ways: the absolute concept of poverty and the relative concept of poverty. a. True b. False The assignment of inputs to specific industries by central planners is made difficult by a. the interdependency among industries. […]

Government gives subsidies to encourage production of products with beneficial externalities. a. True b. False Total profit is maximized if the slope of the total profit curve is a. positive. b. negative. c. increasing. d. zero. Answer: d In short-run […]

One major problem with Social Security is that it is a “pay as you go” system. a. True b. False Increasing GDP generally causes increases in problems of waste disposal. a. True b. False Answer: True Suppose that Joan, the […]

A free market system tends to a. produce a fairly equal distribution of income. b. pay people exactly what they are worth. c. produce a relatively unequal distribution of income. d. pay most people more than they are worth, at […]

Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being. a. True b. False Productivity in manufacturing sectors has risen faster than in service sectors. a. True b. False […]

The terms “correlation” and “causation” are synonymous. a. True b. False The subject of borrowing by the U.S. from its citizens and from other countries, has resulted in one of the fiercest policy debates in recent years. a. True b. […]

The socialist countries of Eastern Europe have a. fewer environmental problems than capitalist countries. b. improved their environment more than the capitalist countries. c. worse environmental problems than capitalist countries. d. worsened since the collapse of communism there. Equilibrium in […]

Which of the following is not a source of inequality in incomes? a. redistribution of income b. differences in intensity of work c. differences in ability d. risk taking Marginal utility is a. the difference in price between one store […]

In a properly functioning economy, money costs approximate opportunity costs. a. True b. False A positive aspect of monopolies is that they may aid innovation in the marketplace. a. True b. False Answer: True Which of the following makes invention […]

Price ceilings will likely a. result in the accumulation of surpluses. b. increase the volume of transactions as we move along the demand curve. c. increase production as producers respond to higher consumer demand at the low ceiling price. d. […]

The invention of new mining methods will affect price through the supply side. a. True b. False If a firm shuts down, its a. fixed costs remain unchanged. b. revenue will fall to zero. c. short-run variable costs will fall […]

A contour map illustrates which of the following? a. the cause-effect relationship between two variables b. the cause-effect relationship between three variables c. the way that three variables are correlated d. the way that one variable affects another, which in […]

When it is cheaper for one firm to produce a number of different commodities together than it is for a group of small firms to produce those commodities, ____ exist(s). a. economies of scale b. economies of scope c. diminishing […]

If corporations have their choice, they will prefer to invest using a. revenue from the sale of stocks. b. revenue from the sale of bonds. c. plowback. d. money borrowed from the bank. A relatively large increase in the cost […]

Ideally, a free trade policy should be accompanied by a. a public education program to make the benefits known. b. open borders and amnesty for all undocumented workers. c. programs to ensure no one loses a job as a result […]

Government in the United States spends more as a percentage of GDP than in most other industrialized nations. a. True b. False Payroll tax is a proportional tax. a. True b. False Answer: False During a war, a government will […]

A $10 fee to obtain a driver’s license is a a. regressive tax. b. degressive tax. c. proportional tax. d. progressive tax. The federal government receives most of its revenue from three sources: personal income tax, corporate income tax, and […]

An efficient allocation of resources exists if a. one group of people can get more of the things they want without someone else having to give up anything. b. no one can get more of the things he wants without […]

Both parties gain in a voluntary exchange. a. True b. False TANF compels welfare recipients to go to work after a period of two years. a. True b. False Answer: True For any combination or outputs, there is an efficient […]

Which of the following observations concerning the absolute definition of poverty is true? a. It is based on average income. b. It is an optimistic definition. c. It is not arbitrary in nature. d. It is a cultural definition. Figure […]

If the production possibilities curves of two countries have the same slope, a. neither has a comparative advantage, and there are no gains from trade. b. although there is no comparative advantage, there are potential gains if there are differences […]

A corporation seeking to expand, and looking for the least risky financing option would choose: a. stocks b. bonds c. retained earnings d. a bank loan If a competitive firm’s short run average cost curve lies above the price of […]

A theory is an abstraction used often by economists to a. describe a problem. b. keep all assumptions in their proper places. c. explain why things work the way they do. d. describe a hierarchical ordering of facts. e. arrange […]

Which of the following best expresses the attitude toward competition of a firm engaged in tacit collusion with its rivals? a. A rolling stone gathers no moss. b. Waste not, want not. c. Do unto others as you would have […]

Marginal utility is measured by the maximum amount of money a consumer is willing to pay for one more unit of a commodity. a. True b. False What type of cost is not relevant to the process of research and […]

People generally purchase less of a commodity as its price increases. This implies that the relationship between quantity purchased and the price of the commodity must have a a. slope always equal to one. b. positive slope. c. zero slope. […]

If a firm’s average cost is currently $100, and the marginal cost is $95, then the average cost is currently falling. a. True b. False A small increase in productivity growth can have a huge impact on a country’s standard […]

Price discrimination leads to higher prices for all consumers. a. True b. False Many large universities rent out parts of their campuses to conference groups during the summer because such groups cause little damage, require little staff attention, and bring […]

Figure 14-1 In Figure 14-1, a technological breakdown in calculator production would cause which movement? a. B to E b. B to C c. B to D d. A to D There is no way that externalities can be corrected. […]

The concept of opportunity cost is more applicable to society as a whole than it is for an individual household. a. True b. False The system of grants from one level of government to another is an example of fiscal […]

If there are many close substitutes available for a good, its elasticity of demand will be higher. a. True b. False Wages are comparatively low in markets where demand for labor is low and supply is high. a. True b. […]

Figure 6-5 If the demand curve in Figure 6-5 is unit elastic, then total expenditure at A is ____ total expenditure at B. a. greater than b. less than c. equal to d. less elastic than Education is subsidized because […]

A progressive tax is one in which the fraction of income paid in taxes rises as a person’s income increases. a. True b. False Collective bargaining is a process used by unions and management to settle upon the terms of […]

If oranges and grapefruit are close substitutes, an increase in the price of oranges will shift the demand curve of a. both products to the right. b. both products to the left. c. grapefruit to the right. d. oranges to […]

An investment in yourself is an investment in what economists call human capital. a. True b. False The definition of efficiency implies that production is carried out on the production possibilities frontier. a. True b. False Answer: True Discounting is […]

One possible solution to improve performance of regulated firms is which of the following? a. Allow the firm to set its own rate of return. b. Allow higher rates of return to cover higher cost of better performance. c. Allow […]

Members of the European Union (EU), rely heavily on this form of indirect taxes. a. Value-added tax b. Excise tax c. Property tax d. Sales tax Necessities such as food and shelter have inelastic demand. a. True b. False Answer: […]

A line that slopes downward from left to right has a positive slope. a. True b. False A cartel is a. a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. b. […]

The basic principle that explains the demand for a factor of production is the a. principle of marginal productivity. b. Hotelling principle. c. principle of opportunity cost. d. Ramsey pricing principle. The cost of processors and memory has decreased dramatically […]

In 1989, Hurricane Hugo devastated Charleston, South Carolina, leaving residents with no electricity for light or refrigeration, and completely cut off from the outside world by fallen trees and washed-out roads. Consequently, the price of ice rose 1,000 percent and […]

Purchasers of corporate bonds lend money to a corporation. a. True b. False There are about 5 million business firms in the Unites States. a. True b. False Answer: False In the long run, more costs become fixed. a. True […]

Society can produce at a point outside the production possibilities frontier, but only if it is using all of its resources efficiently. a. True b. False Which of the following statements is correct? a. Low prices may not always be […]

What are the major problems that will tend to arise if there are legal limits on the movement of prices? a. favoritism and corruption of officials and market participants b. unenforceability of laws and higher costs of transactions c. increasing […]

It can be shown that average revenue and price are always equal. a. True b. False The Organization of Petroleum Exporting Countries is a a. professional trade association for oil companies. b. cartel. c. consortium for joint ventures in oil […]

Capitalism is an economic system in which the production process is controlled primarily by private firms operating in markets. a. True b. False The federal income tax is an example of a a. progressive tax. b. regressive tax. c. proportional […]

Since it spent over $3.6 trillion in 2010, opportunity cost was not an issue for the U.S. government. a. True b. False Table 22-4 Table 22-4 presents the demand and supply schedules for television sets in Japan and the United […]

The benefits principle states that the users of a service should pay for that service. a. True b. False Wages in American industry are very high because of wage laws. a. True b. False Answer: False The key difference between […]

Price ceilings will likely result in the growth of black markets. a. True b. False Interest is the payment for the use of funds used to produce capital. a. True b. False Answer: True Input-output analysis is rarely used because […]

Mr. Paque is a bear hunter for timber companies that want to diminish damage to trees done by bears in the spring. Due to a reduction in the bear population between 1995 and 2005, Mr. Paque finds fewer bears each […]

The observed change in the reserves of copper, lead, and zinc between 1960 and 1990 was most likely caused by a. low prices discouraging exploration for new reserves. b. a slowdown in demand growth. c. high prices that stimulated exploration. […]

The payroll tax receipts a. are used to reduce the national debt. b. are invested in private business for future payments. c. pay off current recipients of Social Security payments. d. go directly into a trust fund for investment in […]

In the U.S., health care may be expensive, but Americans enjoy the longest life-expectancy of any nation. a. True b. False Figure 11-2 In Figure 11-2, at what quantity would the monopolist maximize profit? a. E b. F c. G […]

Laissez faire refers to a program of minimal interference in the market system. a. True b. False If the interest rate is r (expressed as a decimal number), the present value today of $1 to be received n years from […]

Marginal profit is the slope of the total profit curve. a. True b. False The demand curve for a monopolistic competitor has a negative slope. a. True b. False Answer: True Since it is a centrally planned economy, China does […]

Inputs in production processes are called resources. a. True b. False Production technology determines the relationship of total cost to outputs. a. True b. False Answer: True Increasing scarcity of a resource causes new supplies to become more and more […]

One effect of market intervention is resource misallocation. a. True b. False A progressive income tax system can be defined as one in which a. the government uses taxes paid by the wealthy to fund programs for the poor. b. […]

The total physical product of an input is the same thing as its a. total revenue product. b. marginal physical product times output. c. output. d. total consumer’s surplus. A natural monopoly is one that deliberately erects entry barriers. a. […]

Externalities are social costs that affect parties external to a particular economic transaction. a. True b. False Figure 4-16 Assume that Figure 4-16 shows the supply of soda. An increase in the price of syrup used in the production of […]

A line that is perfectly elastic has an elasticity of demand of zero. a. True b. False In a planned economy, a. prices are used to coordinate economic activity. b. central planners set production targets and tell producers how to […]

All of the following are associated with a mixed economy except a. some public influence over the workings of free markets. b. public ownership mixed in with private property. c. homogenization. d. different countries blending the state and market sectors […]

Which of the following formulas defines average cost? a. AC = TC/Q b. AC = MRP = MFC c. AC = MPP/Q d. AC = TC − Q In the case study discussed in the chapter, the electronics firm was […]

“Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve.” True or false? “A producer wanting to employ optimal quantity of inputs should choose the […]

The U.S. Postal Service engages in price discrimination. a. True b. False The U.S. government banned cigarette advertising on radio and television after January, 1971. You would expect to find that after the ban took effect the price of magazine […]

The short-run equilibrium of the firm under monopolistic competition has excess capacity. a. True b. False Using prices to promote efficiency in the utilization of bridges, a. higher prices should be charged for the use of the most crowded bridges. […]

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor’s skill are worse than those from overestimating it. a. True b. False The marginal productivity theory of distribution has been criticized because a. it assumes […]

The marginal revenue product of an input is the marginal physical product times the price per unit of output under perfect competition. a. True b. False Taxing pollution will encourage firms to reduce pollutants dumped in the atmosphere or in […]

A change in consumer preferences will shift the budget line. a. True b. False If a firm has increasing returns to scale at all levels of output, the a. slope of its long-run total cost curve is always negative. b. […]

Which of the following characteristics of a PPF indicates that tradeoffs must be made? a. the downward slope b. the upward slope c. the constant slope d. the curvature A decrease in price of a certain good most likely will […]

When the marginal revenue product of an input is less than its price, the a. producer should expand the use of that input. b. price of the input will automatically rise in a free market. c. producer should reduce the […]

A firm is operating with an optimal combination of inputs. Suddenly the price of one input rises. The firm should a. buy less of that input and more of the other input. b. change its input mix so that the […]

In the long run the prices charged by a firm in monopolistic competition will be a. high enough to provide profits to the firm. b. so low that many firms will drop out of the industry. c. equal to marginal […]

As the rate of interest on borrowed funds increases, the quantity of investment funds demanded diminishes. a. True b. False If the United States imposed a 25 percent tariff on imports of minivans, the effect would be to a. raise […]

Figure 1-2 Identify the slope of the two curves A and B in Figure 1-2. a. A – zero, B – one. b. A – one, B – zero. c. A – one, B – different at different points. d. […]

Direct taxes are levied directly on people or corporations. a. True b. False Taxes on polluting firms have a. been tried, but not successfully. b. been successful in Germany in reducing water pollution. c. resulted in bankruptcy of the affected […]

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry. The widget industry may therefore a. be monopolistically competitive. b. have firms whose goal is sales maximization. […]

If good “A” is represented on the horizontal axis and good “B” on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good “A,” the a. larger the opportunity cost of producing […]

Consider the following information regarding a person’s decision to go to college: college tuition is $20,000 per year, room and board is $10,000 per year, and books and materials are $2,000 per year. Suppose that instead of going to college […]

Statistical studies suggest that the cost of direct controls for any target level of pollution is a. much higher than the cost of taxes on emissions. b. about the same as the cost of taxes on emissions. c. lower than […]

Which of the following observations concerning labor cost patterns over the last century is true? a. Average real wages started rising after 1973. b. Hourly compensation rates have fallen dramatically. c. Compensation growth slowed markedly. d. Average hours worked per […]

A graph conveys information about a cause-and-effect relationship. a. True b. False Affirmative action laws require employers to search for qualified minority applicants, but not to necessarily give them jobs. a. True b. False Answer: True An example of “cream […]

True / False 1. Both parties gain in a voluntary exchange. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost NATIONAL STANDARDS: United States – […]

DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monopoly NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monopoly TOPICS: Monopoly Defined KEYWORDS: BLOOM’S: Comprehension 76. Which of these contributes to the existence of monopoly power? a. a continuously decreasing long-run average cost […]

KEYWORDS: BLOOM’S: Comprehension 189. A market is contestable if a. the number of firms is larger than oligopoly. b. firms spend a lot on advertising. c. there is free entry and exit. d. firms have kinked demand curves. ANSWER: c […]

TOPICS: How Perfect Competition Achieves Optimal Output: Marginal Analysis KEYWORDS: BLOOM’S: Comprehension 186. The degree to which an economic system approaches a market economy depends on the degree to which a. economic choices are made through the free interaction of […]

True / False 1. Efficient allocation of resources makes everyone better off. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Costs of production NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Costs of production […]

ACCREDITING STANDARDS: Productivity and growth TOPICS: The Cost Disease of Some Vital Services: Invitation to Government Failure KEYWORDS: BLOOM’S: Analysis 182. A 2% wage increase for teachers or police officers is: a. usually offset by higher output per worker. b. […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: The State and Local Tax System […]

b. Labor supply will increase because leisure is an inferior good. c. The income effect will reduce labor supply; there is no substitution effect. d. Labor supply will be constant since wages are unaffected. ANSWER: c POINTS: 1 DIFFICULTY: Moderate […]

b. A closed shop is an arrangement that permits only union members to be hired. Some object to this on the grounds that it gives the union too much power and prevents an employer from hiring as he wishes. c. […]

economics TOPICS: The Central Role of Business Firms 114. An industry can be defined as a. the group of all firms that sell a product. b. any company that produces and sells something. c. the set of buyers of a […]

True / False 1. In 1962, Michael Harrington argued in The Other America that there was chronic, severe poverty in America. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: […]

c. free trade. d. strategic trade. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States – Analytic – BB-Legal ACCREDITING STANDARDS: International trade and finance TOPICS: Why Inhibit Trade? 192. William Safire argues that a unilateral free trade policy […]

TOPICS: International Versus Intranational Trade 86. Which of the following is an extreme form of risk associated with investing in a foreign country? a. Credit risk b. Labor unrest c. Expropriation d. Immigration rules ANSWER: c POINTS: 1 DIFFICULTY: Easy […]

130. A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home. The researcher included all costs including the imputed value of time involved to prepare […]

POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Elasticity NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis ACCREDITING STANDARDS: Elasticity TOPICS: Elasticity as a General Concept KEYWORDS: BLOOM’S: Analysis 174. After a number of acquisitions, Air American controls […]

DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The study of economics, and defi – The study of economics, […]

d. 6,000 ANSWER: c POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Marginal costs & benefits NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Marginal costs & benefits TOPICS: Marginal Analysis and Maximization of Total Profit KEYWORDS: BLOOMS: Application 133. […]

d. all of these ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The study of […]

TOPICS: Appendix: Buying Stocks and Bonds KEYWORDS: BLOOM’S: Comprehension 131. If money raised in the issue of new stocks and bonds is used effectively, a. the income from them is not subject to double taxation. b. a firm need not […]

TOPICS: Speculation KEYWORDS: BLOOM’S: Comprehension 171. If stock prices follow a random walk, a. speculation in the stock market destabilizes prices. b. a stock’s past performance is not a good indicator of its future performance. c. rumors, news, and other […]

True / False 1. Corporations produce most of the output in the United States. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions […]

List the three coordination decisions made by every economy. a. Where? When? How? b. How? What? To whom? c. Why? Where? What? d. When? To Whom? Where? It is relatively easy for a firm to enter a perfectly competitive market. […]

Figure 10-7 In Figure 10-7, output at which point represents short-run but not long-run equilibrium? a. A only b. B only c. both A and B d. both B and C On necessities, more of the incidence of tax is […]

Which of the following is not a barrier to entry? a. Legal restrictions b. Patents c. Large sunk costs d. Survivor rights One protection that encouraged entrepreneurs in the U.S. was the enforceability of contracts by the courts. a. True […]

A sum of money to be received in the future is worth more than a sum of money today. a. True b. False The theory of the kinked demand curve is used to explain a. bizarre corporate behavior. b. sales […]

The idea of horizontal equity in taxation implies that a. equally situated individuals should be taxed equally. b. unequally situated individuals should be taxed unequally. c. benefits should be given first to those individuals who need them most. d. the […]

Which of the following would cause an increase in demand for Toyota automobiles? a. an increase in the price of Toyota automobiles b. a decrease in the price of Toyota automobiles c. a decrease in the price of Honda automobiles […]

The price for labor is the wage rate. What happens to the supply of labor if wages increase? a. It increases. b. It decreases. c. It does not change. d. Uncertain-economic theory has no answer to this question. According to […]

When economists are critical of government regulations that prohibit free individuals from making certain kinds of contracts, for example, to purchase a good or service, they will usually invoke the concept of a. marginal analysis. b. mutual gains from voluntary […]

The optimal number of units to produce is best expressed when: a. marginal benefit exceeds marginal cost b. marginal cost exceeds marginal benefit c. marginal benefit and marginal cost are close to equal d. both a and c Land on […]

The contestable market theory best applies to a. pure monopoly. b. oligopoly. c. monopolistic competition. d. perfect competition. Which of the following is not generally considered a failing of market economies? a. Market economies can have severe swings from boom […]

If the price of garbage removal rises, people will a. demand a lesser quantity of garbage removal. b. take more waste to recycling centers. c. repair broken items rather than throwing them out. d. All of the above are correct. […]

Monopolistic competition differs from perfect competition only in the number of firms participating in the market. a. True b. False A certain machine will last one year, will produce $120 in income (received one year later), and will cost $100 […]

Figure 4-3 A 1985 Harvard study showed that the price of cigarettes does not affect how much an individual smokes but whether he smokes. If this is correct, which graph in Figure 4-3 shows the typical individual’s demand curve for […]

As a rule, as a consumer acquires more and more of a good, the marginal utility declines. a. True b. False Productivity growth is the main cause of rising living standards. a. True b. False Answer: True If the demand […]

At his profit-maximizing level of output, a monopolist’s average total cost curve is tangent to his demand curve. The monopolist a. is earning a negative economic profit. b. may or may not be earning a negative economic profit. c. is […]

Usury laws carry the potential of hurting a. borrowers. b. lenders. c. borrowers and lenders. d. government. Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. […]

A good’s marginal social cost is defined as its a. marginal private cost minus the value of any detrimental externality. b. incidental cost. c. marginal private cost plus the value of any taxes paid on its production. d. marginal private […]

The psychological rewards of inventing a new product generally result in ____ profits for entrepreneurs. a. below average b. only average c. above average d. indeterminate Economists favor a negative income tax because they believe a. that it will create […]

Since price tends to equal marginal utility, the price of water is low and the price of diamonds is high. a. True b. False Elasticity of demand equals the ratio of the percentage change in quantity demanded to the percentage […]

Because there is a trade-off between inflation and unemployment in the short run, a. lower unemployment will typically cause inflation to fall. b. policies designed to reduce unemployment will typically set off a recession. c. policies designed to reduce inflation […]

Table 7-4 Table 7-4 shows a production relationship. Assuming the labor input is fixed at 4, what will be the optimum capital input assuming an output price of $1 and a $90-per-day cost for one unit of capital? a. 1 […]

Which of the following events create an outward shift of the production possibilities curve? a. The United States moves resources from the production of goods for domestic production to the production of goods for export. b. Tax reductions reduce the […]

Money spent on college tuition is considered human capital by economists. a. True b. False Figure 22-2 In Figure 22-2, if the United States and Mexico are negotiating to trade wheat for petroleum, a. the United States must receive more […]

Table 7-5 Table 7-5 shows short-run total cost figures for a stereo manufacturer. At what output level does short-run average total cost reach a minimum? a. 2 b. 3 c. 4 d. 5 Command economies are able to achieve greater […]

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively. The four-firm concentration ratio for the steel industry is a. 0,19 b. 0,55 c. 0,138 d. 0,65 Natural […]

The growth rate of productivity is the most important determinant of material well-being in the short run. a. True b. False The demand curve for funds is downward sloping because a. the value of the MRP in terms of today’s […]

The Industrial Revolution refers to the stream of new technology and the resulting growth of output than began in England toward the end of the eighteenth century. a. True b. False The marginal revenue curve for a monopolist is a. […]

Profits will be maximized when the slope of the total revenue curve and the slope of the total cost curve equal zero. a. True b. False Figure 7-6 Which of the lines in Figure 7-6 represents a typical average fixed […]

Figure 5-16 Figure 5-16 shows Adam’s purchases of bananas and apples when apples cost $5 each and bananas $4 each. The information implies that Adam’s income a. must be $9. b. must be $20. c. must be $40. d. Adam’s […]

Consumer spending accounts for what share of GDP? a. 20% b. 40% c. 70% d. 90% Taxes on polluting firms for pollution are intended to a. raise enough revenue to cut the deficit in half. b. encourage firms to reduce […]

If a farmer’s opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then her opportunity cost of producing 50,000 bushels of soybeans must also be 20,000 fewer bushels of wheat. a. True b. False Define […]

Which of the following is most likely to reduce the consumption of an exhaustible natural resource? a. a decrease in monopoly control of the market for the resource b. government tax policies that give tax breaks to entrepreneurs who search […]

Takeovers and takeover attempts waste valuable capital. a. True b. False Debt grew faster than GDP during and after the recent Great Recession, when the government had to spend more (as for unemployment benefits), while its tax revenue shrank. a. […]

Price controls on resources generally lead to surpluses. a. True b. False As we move down a straight-line demand curve, the price elasticity becomes a. larger. b. smaller. c. larger, then smaller. d. smaller, then larger. Answer: b Figure 8-3 […]