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 good will be
bought.
c. negative, because when people buy more of a good the cost of producing it will fall.
d. negative, because with everything else equal, the same people will buy more of a
good when its price is lower.
e. positive, because as the price rises, people want to sell more of the good.
Economists predicted that the price of a depletable natural resource would rise by about
15 percent. Actually the price fell 10 percent. What most likely happened?
a. A government subsidy was removed.
b. Extraction costs increased.
c. Price controls were suspended.
d. An unexpected discovery of reserves was made.
In the United States, most workers
a. work for government of some sort.
b. produce raw materials for manufacturing.
c. work in agriculture and farming.
d. produce services rather than goods.
It is impossible for both nations to gain when trading with one other.
a. True
b. False
Abstraction ignores many details in order to focus on the most important elements of a
problem.
a. True
b. False
Figure 5-8
In Figure 5-8, the consumer is indifferent between the combinations of beer and wine
coolers indicated by points
a. A, C.
b. B, D.
c. C, B.
d. A, B.
What percentage of American business firms are incorporated?
a. about 20 percent
b. about 40 percent
c. about 50 percent
d. over 60 percent
Are markets always in equilibrium?
a. Yes, they are always at the equilibrium point, or very close to it.
b. Yes, because few things tend to alter supply and demand.
c. No, but if there is no interference, they tend to move toward equilibrium.
d. No, they never ‘settle down” into a stable price and quantity.
e. Uncertain, economic theory has no answer to this question.
When every country does what it is best at,
a. every other nation will lose because of the inability to compete.
b. all other nations can benefit because more of every commodity can be produced.
c. some nations will gain at the expense of other nations.
d. rich nations will gain at the expense of poor nations.
Assume Joe invests a total of $10,000 in a company – $5,000 of which is his own
money and $5,000 which he borrowed at a 10% interest rate. If the company’s stock
value decreases by 5% in one year at which time Joe sells his shares of the stock, what
is Joe’s rate of return on his investment?
a. −5%
b. −10%
c. −20%
d. −30%
The short-run market demand schedule in perfect competition is positively sloped.
a. True
b. False
In some markets, demand can be approximated by
Q = 50 − 5P + 10Y
where Q is quantity, P price per unit, and Y = buyers’ income. Supply can be
approximated by
Q = −5 + 10P.
a. If Y = 20, what is equilibrium price and output?
b. If Y rises to 25, what is the new equilibrium price and output?
The windfall profits tax on oil will curtail oil production if
a. oil executives decide to be spiteful.
b. the demand for oil is inelastic.
c. the supply curve for oil is upward sloping.
d. the supply curve for oil is vertical.
Compared to a perfectly competitive firm, a monopolist
a. is less likely to advertise.
b. will, according to Schumpeter, invest fewer resources in research and development.
c. usually produces an inefficiently small level of output.
d. is less likely to face government regulation.
When residents surrounding an airport complain about noise from aircraft landings and
takeoffs, the relevant economic analysis is that of
a. externalities.
b. equality-efficiency trade-off.
c. comparative advantage.
d. the cost decrease of the service sector.
e. the cost disease of personal services.
Define the following terms and explain their importance to the study of economics.
a. demand
b. surplus
c. equilibrium
d. law of supply and demand
e. quantity demanded
Which of the following is the correct way to describe equilibrium in a market?
a. At equilibrium, demand equals supply.
b. At equilibrium, quantity demanded equals quantity supplied.
c. At equilibrium, market forces are no longer at work.
d. Equilibrium is a tendency, a state of perpetual motion.
e. Equilibrium is the best combination of price and quantity.
For about the last 45 years, federal taxes have remained relatively constant as a
percentage of GDP.
a. True
b. False
The poverty line is the income level
a. earned by a worker employed full-time at the minimum wage.
b. below which a family is officially considered “poor.”
c. above which a family is not entitled to government assistance.
d. that is the average for American families.
The U.S. economy is relatively open in terms of economic activity related to
international trade.
a. True
b. False
Most Americans
a. have accurate perceptions of the level of corporate profits.
b. underestimate corporate profits.
c. overestimate corporate profits.
d. believe that corporations earn zero profit.
Economic theory predicted that the price of a depletable resource would rise by 10
percent. In reality, the price fell by 5 percent. Which of the following events could
explain this discrepancy?
a. Known reserves of the resource were depleted.
b. The interest rate rose by 15 percent.
c. Antitrust enforcement broke up a cartel among major suppliers of the resource.
d. The government imposed an effective price floor.
A consumer possesses five pounds of bananas and values their total utility at $2,14 If
one additional pound is acquired and marginal utility is 11 cents, total utility will
a. rise to $2,25
b. fall to $2,03
c. stay the same.
d. fall to $2,11
The demand curve facing a firm is also the firm’s
a. total utility curve.
b. average revenue curve.
c. average utility curve.
d. total revenue curve.