Figure 17-4
Which of the following is true at W2?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is positively sloped.
Figure 18-2
Figure 18-2 shows a demand curve
and two sets of supply curves, one set more elastic than the other. If the government
imposes an excise tax of $1.00 on every unit sold, the government’s revenue from the
tax
A) is larger if the supply curve is S0.
B) is larger if the supply curve is S1.
C) is identical under either supply curve.
D) is not maximized.
When Toyota introduced its 2010 Prius, it announced that the average retail price of the
2010 model would be lower than the average retail price was for the equivalent 2009
model. Which of the following would explain the price differential?
A) The demand for the Prius had increased, and the supply of the Prius remained
unchanged.
B) The supply of the Prius had decreased, and the demand for the Prius remained
unchanged.
C) The demand for the Prius had decreased, and the supply of the Prius had increased.
D) The demand for the Prius had increased, and the supply of the Prius had decreased.
When a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill
serves as a
A) medium of exchange.
B) unit of account.
C) store of value.
D) standard of deferred payment.
The natural resources used in production are made available in the
A) goods and services market.
B) product market.
C) government market.
D) factor market.
Ocean Spray is considered to be an oligopoly firm because, until the 1990s, it faced
little competition in the market for fresh and frozen cranberries. Why?
A) Ocean Spray had a patent on the production of cranberries that gave the company
the exclusive right to market its product for 20 years. The 20-year period ended in the
1990s.
B) Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries.
C) Ocean Spray was able to achieve significant economies of scale in the production of
cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as
well, but Ocean Spray still controls about 80 percent of the cranberry market.
D) The federal government imposed a high tariff on cranberry imports. During the
1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the
cranberry market.
If a graph has a line that shows the amount of outsourcing in the last ten years, it is
known as
A) a pie chart.
B) a time-series graph.
C) a demand curve for outsourcing.
D) a supply curve of outsourcing.
A decrease in the demand for incandescent light bulbs due to changes in consumer
tastes, accompanied by a decrease in the supply of incandescent light bulbs as a result
of government restrictions, will result in
A) a decrease in the equilibrium quantity of incandescent light bulbs and no change in
the equilibrium price.
B) a decrease in the equilibrium price of incandescent light bulbs and no change in the
equilibrium quantity.
C) a decrease in the equilibrium price of incandescent light bulbs; the equilibrium
quantity may increase or decrease.
D) a decrease in the equilibrium quantity of incandescent light bulbs; the equilibrium
price may increase or decrease.
One result of the public choice model is that most economists believe that
A) when market failure occurs, government intervention will always lead to a more
efficient outcome.
B) government intervention will always result in a reduction in economic efficiency in
regulated markets.
C) policymakers may have incentives to intervene in the economy in ways that do not
promote economic efficiency.
D) the voting paradox will prevent voters from selecting the best person for public
office.
A general formula for the multiplier is
A) .
B) .
C) .
D) .
Table 14-4
Alistair Luggage and Baine
Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm
must decide on whether to increase its advertising spending to compete for customers.
If one firm increases its advertising budget but the other does not, then the firm with the
higher advertising budget will increase its profit. Table 14-4 shows the payoff matrix
for this advertising game. How are the firms in this advertising game caught in a
prisoner’s dilemma?
A) They are not in a prisoner’s dilemma because there is one clear strategy for each.
B) They would be more profitable if they refrained from advertising but each fears that
if it does not advertise, it will lose customers.
C) Since each firm is uncertain about the other’s behavior, each will adopt a
wait-and-see attitude which results in no increase in market share and no new
customers.
D) Only the first mover is caught in a prisoner’s dilemma because the second has a
chance to observe and respond.
Which of the following is a factor of production?
A) a sofa produced by a furniture manufacturer
B) 20 shares of Microsoft stock
C) the janitor at the local elementary school
D) $500 in cash
Economists have shown that the burden of a tax is the same whether the tax is collected
from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on
sellers?
A) Sellers are more honest than buyers.
B) The demand for both gasoline and cigarettes is very elastic.
C) The Equal Protection Clause of the U.S. Constitution prohibits the government from
imposing taxes like these on buyers.
D) It is more XOAicult for buyers to keep track of their purchases, and for the
government to verify that the right of amount of tax revenue is collected.
If the quantity of donuts supplied is represented by the equation QS = -15 + 5P, then the
corresponding price of donuts is represented by the equation
A) P = 0.2QS + 3.
B) P = 5QS + 75.
C) P = QS – 7.5.
D) P = 15 – 0.5QS.