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 Coke and Pepsi. A successful campaign would
be indicated if the cross elasticity went from
a. 0,9 to 0,5
b. 0,9 to 1,5.
c. −0,5 to −0,2
d. −0,9 to −1,5
Figure 18-2
Figure 18-2 shows the widget market before and after an excise tax is imposed. After
the tax is imposed, the amount that a firm keeps for itself from the sale of each widget
is ____.
a. $95
b. $100
c. $120
d. $125
What would the Herfindahl-Hirschman Index equal for an industry consisting of six
firms with market shares of 5%, 10%, 15%, 20%, 25%, and 25%?
a. 100
b. 1,350
c. 1,375
d. 2,000
To be effective, a price floor must be
a. above the equilibrium price.
b. at the equilibrium price.
c. below the equilibrium price.
d. anywhere on the graph.
Total fixed cost
a. increases as output increases.
b. declines as output increases.
c. is always zero.
d. remains constant even if the firm shuts down.
In the spring of 1993, President Clinton proposed an energy tax. At one point in the
congressional review of the proposal there was discussion of various exemptions for
farmers, truckers, etc. One plan was to dye fuel different colors to better track the
appropriate tax on the user of the fuel. Economists would label these exemptions
a. loopholes.
b. economically efficient.
c. obviously fair.
d. all of the above.
A price cut will increase the revenue a firm receives if the demand for its product is
a. elastic.
b. inelastic.
c. of unit elasticity.
d. straight elastic.
Which of the following is closest to the economist’s definition of perfect competition?
a. the airline industry
b. the soft drink industry
c. the fishing industry
d. cellular telephone service
Very few societies have used price controls.
a. True
b. False
Regarding economic models, which of the following statements is NOT true?
a. An economic model is a simplified representation of a theory or part of a theory
b. An economic model can provide answers for policy makers.
c. An economic model can illuminate an important economic problem
d. An economic model can depict 3-variable diagrams.
The ratio of the percentage change in quantity demanded to the percentage change in
income is known as the cross elasticity of demand.
a. True
b. False
Which of the following is not a characteristic of perfect competition?
a. Firms and consumers all have perfect information about the good and market.
b. Sellers can enter the market easily.
c. All goods sold are identical.
d. All consumers have identical individual demand curves.
The City Symphony presents three open-air concerts in the city park pavilion during the
spring and summer. Many who attend make donations for symphony expenses, but the
donation is not required. Some who attend make no contributions. Economists would
a. classify the noncontributors as detrimental externalities.
b. call the concerts excludable events.
c. call the noncontributors free riders.
d. call the concerts depletable goods.
Although economists generally favor a negative income tax, there is little political
support for it.
a. True
b. False
Given the characteristics: (1) many buyers and sellers, (2) free entry and exit, (3)
perfect information, and (4) heterogeneity of products, monopolistic competition and
perfect competition share
a. (1) and (4).
b. (1), (2), and (3).
c. (2) and (4).
d. (2), (3), and (4).
Normally, to the extent that a governmental control mechanism succeeds in affecting
price, it can be expected to lead to a corresponding
a. reduction in the volume of sales only if the price is forced down.
b. reduction in the volume of sales if the price is forced down and an increase in the
volume of sales if the price is forced up.
c. decrease in the volume of sales whether the price is forced up or down.
d. increase in the volume of sales whether the price is forced up or down.
The share of GDP taken by taxes has increased dramatically since the 1960s.
a. True
b. False
Average cost
a. is always larger than marginal cost.
b. declines for some range of output, hits a minimum, and then increases.
c. is always smaller than marginal cost.
d. is total cost/price of the product.
Higher prices can discourage use/consumption, which in turn may better allocate scarce
resources.
a. True
b. False
What is the primary threat of monopoly and oligopoly to the public interest?
a. Cartels
b. Predatory pricing
c. Price wars
d. Monopoly power
Table 21-1
Consider the economy described by the income distribution in Table 21-1. From this
table, we can conclude that the
a. poorest quarter of the population earns 15 percent of the income.
b. “middle” fifth of the population earns 32 percent of the income.
c. poorest quarter of the population earns 19 percent of the income.
d. richest fifth of the population earns 49 percent of the income.
In the traditional view, stocks are ____ than bonds to the firm that issues them and ____
than bonds to the investor who purchases them.
a. less risky; less risky
b. less risky; riskier
c. riskier; less risky
d. riskier; riskier
Figure 15-1 describes conditions in the monopolized weezil industry. If the government
replaces the monopolist with perfectly competitive firms and forces these firms to take
account of all the costs and benefits they impose on society, the industry will produce
an output equal to
a. W.
b. X.
c. Y.
d. Z.