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 sell.” This firm is experiencing
a. decreasing returns to scale.
b. constant returns to scale.
c. increasing returns to scale.
d. abnormal demand patterns.
Which of the following is not a principal means by which corporations obtain money
for investment?
a. selling stocks
b. selling bonds
c. retaining earnings
d. receiving dividends
The Organization of Petroleum Exporting Countries (OPEC) is an example of
a. a price leadership system.
b. a generally unsuccessful cartel.
c. an organization devoted to tacit collusion.
d. a successful cartel.
In their 1994 book, The Bell Curve, Murray and Herrnstein presented evidence that IQ
is an important determinant of economic success.
a. True
b. False
If the interest rate is positive, the present value of $10 to be received in the future is
a. less than $10
b. equal to $10
c. more than $10
d. Any of the above is possible, depending on the interest rate and when the payment is
to be received.
The payroll tax is a
a. progressive tax.
b. neutral tax.
c. regressive tax.
d. proportional tax.
Assume the demand schedule for cookies is downward sloping. If the price of cookies
falls from $1,50 to $1,25 per dozen,
a. the demand for cookies will fall.
b. the demand for cookies will rise.
c. a larger quantity of cookies will be demanded.
d. a smaller quantity of cookies will be demanded.
Which of the following observations is not true?
a. Demand curve of the perfectly competitive firm is perfectly elastic.
b. There is only one price for a product in a perfectly competitive market.
c. A firm in a perfectly competitive market can sell as much as it wants at market price.
d. Demand curve of the perfectly competitive industry is perfectly elastic.
When an economy operates efficiently,
a. the MRPs of every input into the production of a good are equal.
b. marginal utility equals marginal cost for every good.
c. the price of a good equals the sum of the marginal physical products of its inputs.
d. All of the above are correct.
The key difference between monopolistic competition and perfect competition is that in
monopolistic competition the tangency of
a. AC and the demand curve occurs along the negatively sloped part of AC.
b. the demand curve and AC occurs at the minimum point of the AC curve.
c. AC and the demand curve occurs along the positively sloped part of AC.
d. MC and MR at the optimum output.
Figure 15-1
Figure 15-1 portrays conditions in the monopolized weezil industry. From the diagram,
the production of weezils
a. must cause a detrimental externality.
b. must cause a beneficial externality.
c. must cause either a detrimental or a beneficial externality, more information is
needed to determine which one.
d. may or may not cause an externality.
“Peak pricing” can often improve economic efficiency.
a. True
b. False
Average cost equals total cost multiplied by the number of units of output.
a. True
b. False
Direct controls have a clear advantage where
a. an emission is so dangerous that it is prohibited altogether.
b. a sudden change in circumstances calls for prompt and substantial change in conduct.
c. effective and dependable metering devices have not been invented or are
prohibitively costly to install and operate.
d. All of the above create an advantage.
The software industry has traits in common with monopoly markets.
a. True
b. False
To promote economic efficiency, government should
a. keep all prices as low as possible.
b. keep all prices high so that people will save more money.
c. allow the market to set low prices for abundant goods and high prices for scarce
goods.
d. never interfere with firms’ price setting powers.
Do markets solve all of society’s problems?
a. Yes, markets are efficient and work well under nearly all circumstances.
b. Yes, markets solve the problems of production and distribution.
c. No, they do not solve problems such as unemployment and inflation.
d. No, they hardly solve any problems at all.
e. Uncertain, economic theory has no answer to this question.
Price discrimination
a. may lead to greater output.
b. always leads to a reduction of output.
c. leads to lower profits for the firm.
d. causes firms to operate at a higher cost.
One benefit of U.S. society that encouraged entrepreneurship was the inflow of capable
immigrants.
a. True
b. False
If a technological breakthrough reduces input quantities needed to produce some item,
a. cost of production will be increased.
b. the price of the product will rise.
c. the price of the product will fall.
d. quantity demanded of the product will fall.
Economists and accountants use the same definition of profit.
a. True
b. False
Suppose that 19th-century politicians had succeeded in their attempt to impose a ‘single
tax”-a tax on suppliers of land (i.e., landlords). Most of the economic burden of the tax
would have been borne by
a. renters, because the demand for land is generally less elastic than its supply.
b. renters, because the demand for land is generally more elastic than its supply.
c. landlords, because the demand for land is generally less elastic than its supply.
d. landlords, because the demand for land is generally more elastic than its supply.
Some hotels in Myrtle Beach, South Carolina charge over $200 a night in the summer
but sometimes as little as $99 a night in the winter. Use supply and demand analysis,
including graphical and verbal explanation, for these winter ‘sales.”
In what way is monopolistic competition more like competition, and in what way is it
more like monopoly?
Are returns to a single input and returns to scale one and the same? Explain.
What makes the demand curve of the perfectly competitive firm uniquely different from
that of firms in other kinds of market structures?
It has been said that well-educated citizens are necessary for democracy. Discuss this
idea in economic terms. What market imperfection might occur and what are the
appropriate government policies to correct it?
How would an increase in cigarette taxes succeed according to the following criteria:
collecting a large amount of tax revenue; distorting demand as little as possible;
discouraging consumption of harmful commodities?
Should stock market speculation be encouraged or discouraged?
What are the factors that contribute to productivity growth in the market economy and
which of them is considered most important?