Which of the following statements concerning the supply of labor is true?
a. The wage rate has no effect on the supply of labor.
b. The labor supply curve is downward sloping.
c. The supply of labor is determined by the prevailing wage rate.
d. The typical labor supply curve is upward sloping.
Assume 300 billion pounds of Ostrich meat is produced per year when the price is 50
cents per pound, and 500 billion pounds when the price is 60 cents per pound. The
supply of Ostrich meat, other factors held constant, is:
a. price elastic. c. income elastic.
b. price inelastic. d. income inelastic.
Monopolistic competitive firms in the long run earn:
a. positive economic profits. c. negative economic profits.
b. zero pure economic profits. d. none of these.
Normal profit is a term for:
a. explicit profit.
b. the minimum profit to keep a firm in operation.
c. the accounting profit forgone.
d. pure economic profit.
How would a decrease in consumer income affect the market for new automobiles?
a. Demand would decrease, leading to an increase in price and a reduction in quantity
sold.
b. Demand would decrease, leading to a reduction in price and a reduction in quantity
sold.
c. Demand would increase, leading to an increase in price and an increase in quantity
sold.
d. Demand would increase, leading to a reduction in price and an increase in quantity
sold.
Which of the following is the most likely result of an increase in the minimum wage?
a. An increase in the employment of unskilled workers.
b. A decrease in the number of workers seeking minimum wage jobs.
c. An increase in the demand for unskilled workers.
d. A decrease in the employment of unskilled workers.
The number of computers bought increased by 20 percent when the price of on-line
services declined by 10 percent. Assuming other factors are held constant, computers
and on-line services are classified as:
a. complements. c. substitutes.
b. unrelated goods. d. social goods.
In order to prove that Dr. Pepper and 7-Up are substitutes, the FTC should test the ____
and get a ____.
a. price elasticity of demand; number less than 1
b. income elasticity; positive number
c. price elasticity; negative number
d. price elasticity of demand; number greater than 1
e. cross-price elasticity; positive number
A decrease in demand leads to a (an):
a. increased equilibrium price and an increased equilibrium quantity.
b. decreased equilibrium price and a decreased equilibrium quantity.
c. decreased equilibrium price and an increased equilibrium quantity.
d. increased equilibrium price and a decreased equilibrium quantity.
Exhibit 8-15 Short-run cost curves for E-Z Care lawn mowing company
In Exhibit 8-15, if the market price of mowing lawns is $16 per lawn, then E-Z-Care
will earn the biggest profit by mowing:
a. 5 lawns per day.
b. 7 lawns per day.
c. 8 lawns per day.
d. as many lawns per day as is physically possible.
The Federal Trade Commission Act was passed in:
a. 1890. c. 1929.
b. 1914. d. 1933.
If Country A has an absolute advantage over Country B in the production of every
commodity:
a. mutual gains from trade between Country A and Country B would be impossible.
b. Country B would be able to gain from trade but not country A.
c. the joint output of the two countries could not be increased through specialization and
exchange.
d. mutual gains from trade would still be possible.
Exhibit 10-7 Two-Firm Payoff Matrix
Suppose costs are identical for the two firms in Exhibit 10-7. Each firm assumes
without formal agreement that if it sets the high price its rival will not charge a lower
price. Under these “tit-for-tat” conditions, equilibrium will be established by:
a. Camel charging the high price and Marlboro charging the high price.
b. Camel charging the high price and Marlboro charging the low price.
c. Camel charging the low price and Marlboro charging the low price.
d. Camel charging the low price and Marlboro charging the high price.
Exhibit 6A-1 Consumer Equilibrium
Given the budget lines and indifference curves shown in Exhibit 6A-1, points D, A, and
E yield:
a. more total utility than point B.
b. more total utility than points B and F.
c. less total utility than points B and C.
d. equal total utility to points B, F, and C.
Firms in a monopolistically competitive industry produce:
a. homogeneous goods and services. c. competitive goods only.
b. differentiated products. d. consumption goods only.
Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game
day. This suggests:
a. the price of the tickets must be very high or else people would not consider them
valuable.
b. the price is set below the equilibrium level.
c. the Indiana basketball stadium is relatively small.
d. everyone who attends the game will enjoy it.
Assume the short-run average total cost for a perfectly competitive industry remains
constant as the output of the industry expands. In the long run, the industry supply
curve will:
a. have a positive slope.
b. have a negative slope.
c. be perfectly horizontal.
d. be perfectly vertical.
A tariff can be defined as a:
a. tax on imports. c. legal limit on imports.
b. tax on exports. d. legal limit on exports.
Exhibit 12-8 Negative income tax for a family
Under the negative income tax shown in Exhibit 12-8, what cash payment would a
family with no earned income receive from the government?
a. $0.
b. $10,000.
c. $15,000.
d. $30,000.
A util:
a. can measure satisfaction with factual accuracy.
b. is not a valid concept.
c. applies to a good but not to a service.
d. is purely a fictitious measure of the satisfaction a consumer derives from a product.
e. can be used in place of money in some countries.
If the demand for the finished product increases, the:
a. demand for the resources will increase.
b. demand for the resources will decrease.
c. marginal factor cost will increase.
d. marginal factor cost will decrease.
e. MP will increase.
Under a negative income tax system, people can make payments to or receive them
from the IRS.
What are market failures? Discuss examples of market failures. What can government
do to improve the results of market failures?
An equilibrium price is unaffected by nonprice factors.
What are the pros and cons of a competitive market in the long run?
In general, GDP per capita is not highly correlated with alternative measures of quality
of life.
Describe the vicious cycle of poverty. What are the consequences of this cycle?
Price discrimination often permits some consumers who otherwise would be excluded
from a market to buy a good or service.
International trade forces countries to consume a combination of goods that is inside
their production possibilities curve.
The utility of a good measures its usefulness.