Organizations that transform resources into products are known as
A) firms.
B) entrepreneurs.
C) households.
D) factors.
A non-discriminating monopolist’s price equals its marginal revenue only when
A) output is zero.
B) total revenue is a maximum.
C) marginal revenue is zero.
D) the monopolist’s demand schedule intersects the horizontal (quantity) axis..
As long as price is sufficient to cover ________, the firm is better off by operating
rather than by shutting down.
A) marginal cost
B) average fixed cost
C) average variable cost
D) marginal revenue
Related to theEconomics in Practice on page 55: The Amazon Kindle and the electronic
textbooks available for the Kindle are complementary goods. Electronic textbooks and
traditional, hard copy textbooks are substitute products. If the price of the Kindle
decreases,
A) demand for the Kindle increases, and demand for traditional, hard copy textbooks
decreases.
B) the quantity of Kindles demanded increases, and demand for electronic textbooks
increases.
C) demand for the Kindle increases, and the quantity of electronic textbooks demanded
increases.
D) the quantity of Kindles demanded increases, and the quantity of electronic textbooks
demanded increases.
Behavioral economics
A) blends insights from sociology and economics.
B) suggests that too much variety may be welfare enhancing.
C) has contributed to microeconomics but not to macroeconomics.
D) suggest that consumers purchase health club memberships instead of paying per visit
in an attempt to commit themselves to an exercise regime.
An external cost is
A) MSC + MC.
B) MSC MC.
C) MSC/ MC.
D) MSC × MC.
Figure 20.2
Refer to Figure 20.2. ________ has a comparative advantage in producing ________.
A) England; cars
B) England; cars and trucks
C) the United States; cars
D) the United States; cars and trucks
A point on a total variable cost curve shows the ________ variable cost a firm will bear
to produce a certain output.
A) highest
B) lowest
C) change in
D) average
A lawn service company has the following production possibilities. With one, two,
three, and four workers, the company can mow 5, 12, 17, and 20 lawns per day,
respectively.
The marginal product of the second worker is
A) 3
B) 5
C) 7
D) 12
Mama Lena’s, a frozen food producer, is a monopolistically competitive firm. Mama
Lena’s is currently selling frozen lasagna at a price of $10. Mama Lena’s marginal cost
is $5 and marginal revenue is $5. This firm should ________ to maximize profits in the
short run.
A) increase output to where price just equals marginal cost
B) decrease output to where price just equals marginal cost
C) continue to produce the same output level
D) Indeterminate from the given information.
A fund that takes household savings and puts them into high-risk ventures in exchange
for a share of the profits if the new business succeeds is a
A) business capital fund.
B) innovation capital fund.
C) risk capital fund.
D) venture capital fund.
Figure 15.2
Refer to Figure 15.2. From society’s point of view, the efficient level of output is
A) 40 perms.
B) 50 perms.
C) 60 perms.
D) 80 perms.
Factors of production that can be used together to enhance the other’s productivity are
A) substitutable inputs.
B) complementary inputs.
C) duplicate inputs.
D) proportionate inputs.
The Time-for-a-Change wristwatch company holds a patent on holographic
wristwatches. The company can earn a profit on the sale of holographic wristwatches
A) in the short run but not in the long run because new firms will enter the industry in
the long run.
B) only in the long run because government regulations prevent monopolists from
earning profits in the short run.
C) in the long run but not the short run because the monopolist will face competition in
the short run.
D) in the long run because entry into the industry by new firms is blocked until the
patent expires.
Figure 3.7
Refer to Figure 3.7. An increase in demand is represented by the movement
A) from D2 to D1.
B) from D2 to D3.
C) along D2 from Point B to Point A.
D) along D2 from Point B to Point C.
Figure 6.1
Refer to Figure 6.1. Assume Tom’s budget constraint is AC. At which point does Tom
consume only hot dogs?
A) A.
B) B.
C) E.
D) D.
Public goods represent a market failure because
A) they are provided by firms with market power.
B) positive externalities are created through their production.
C) by their very nature they are nonexcludable and nonrival, which makes it difficult
for the private sector to supply them profitably.
D) there is incomplete information regarding their quality.
According to Karl Marx, the value of a commodity depends only on the amount of
A) capital needed to produce it.
B) labor needed to produce it.
C) natural resources needed to produce it.
D) time needed to produce it.
Figure 16.3
Refer to Figure 16.3. ________ take into consideration the costs he imposes on his wife
by playing the saxophone, he will play his saxophone for three hours per day.
A) If Bill is not forced to
B) If Bill is forced to
C) Whether or not Bill is forced to
D) Bill will never play his saxophone for three hours per day.
If a buyer or seller enters into an exchange with another party who has more
information, there is
A) symmetric information and moral hazard.
B) asymmetric information and adverse selection.
C) a negative externality imposed.
D) a free-rider problem.
Experimental research in small cities suggests that mandating work for welfare
recipients increases their income. Therefore, we should mandate work requirements for
all welfare recipients. This statement is an example of
A) fallacy of inductive reasoning.
B) ceteris paribus fallacy.
C) fallacy of composition.
D) post hoc, ergo propter hoc fallacy.
Figure 4.4
Refer to Figure 4.4. Assume that initially there is free trade. Tax revenue of $ 50 million
per day will be generated if the United States imposes a ________ tax per barrel on
imported oil.
A) $25
B) $50
C) $100
D) $150
Figure 3.14
Refer to Figure 3.14. An increase in supply is represented by the movement from
A) S2 to S3.
B) S2 to S1.
C) Point B to Point A along supply curve S2.
D) Point B to Point C along supply curve S2.
Monopolistically competitive firms in long-run equilibrium produce at less than
A) minimum ATC.
B) the MR = MC output.
C) the optimal scale.
D) All of the above are correct.
Which of the following statements is true for a command economy?
A) Consumers have no choice concerning what they buy.
B) Manufacturers decide what is produced.
C) The amount of a good supplied always equals the amount of the good demanded.
D) The state decides how to distribute what is produced.
Figure 3.15
Refer to Figure 3.15. An increase in quantity supplied is represented by a movement
from
A) S2 to S1.
B) S2 to S3.
C) Point B to Point A along supply curve S2.
D) Point B to Point C along supply curve S2.
If income increases by 10% and, in response, the quantity of housing demanded
increases by 7%, then the income elasticity of demand for housing is
A) -1.
B) -0.7.
C) 7.
D) 43.
A family that earns $20,000 a year pays $200 a year in city wage taxes. A family that
earns $40,000 a year pays $1,600 a year in city wage taxes. The city wage tax is
A) a progressive tax.
B) a regressive tax.
C) a proportional tax.
D) a benefits-received tax.
A measure that can change from observation to observation is known as a(n)
A) empirical measure.
B) model.
C) causality.
D) variable.
Laura is scalping tickets for a Lakers’ game. She can sell her tickets for at least a normal
profit
A) when prices are too high.
B) any time the Lakers are popular.
C) when the price set by the Lakers is less than the market equilibrium price.
D) only when there is excess supply.
For ________ goods, market demand is the horizontal summation of individual demand
curves and for ________ goods, market demand is the vertical summation of individual
demand curves.
A) private; public
B) public; private
C) nonrival; rival
D) nonexcludable; excludable
Comment on the following statement. “Taxing externality-producing activities may not
eliminate damages.”
Martha owns a factory which can produce 150 coffee mugs using the following five
combinations of labor and capital:
If the price of capital is $5 per unit and the price of labor is $3 per unit, calculate the
total cost of producing 150 coffee mugs under each technology. Which technology
would a profit-maximizing firm use?
The manager of a baseball team wants to hire a new pitcher for $4 million per year.
Under what circumstances would it make sense for the team to do so?
Define diminishing marginal utility.
List the major categories of tangible capital.
What do economists mean when they use the phrase “excess burden” as it relates to
taxes?
What relationship is shown by a supply curve?
Bubba’s Burgers sells hamburgers in a perfectly competitive market at a price of $1.50
each. At the profit-maximizing (cost-minimizing) level of output, average total cost is
$1.90 per hamburger and average variable cost is $1.75 per hamburger. Should the firm
continue to operate in the short run? Explain.
Explain the relationship between marginal cost and average variable cost.
Draw two graphs: one showing how fixed cost varies with output and the other showing
how average fixed cost varies with output.
Why is knowledge considered a type of capital?
Suppose country X can produce a personal computer at an opportunity cost of 1000
t-shirts. Assume that country X has a comparative advantage in the production of
t-shirts. Would country X ever agree to terms of trade with country Y such that one
personal computer would be exchanged for 1100 t-shirts?
Your boss explains to you that the total fixed costs of the company are $1 million. He
also informs you that each unit of production will cost twenty five cents more with each
100-unit increase. He has asked you to draw the fixed costs of the company with costs
on the vertical axis and quantity of goods sold on the horizontal axis. Without drawing a
graph tell your boss what the graph will look like using words. What information did
your boss give you that you didn’t need in order to draw the graph?
Explain what a proportional tax is and provide an example.
Which isoquant represents a higher level of output? Explain.
Gasoline taxes are usually used in part to finance the road and highway repair and new
construction. Which principle of taxation does this type of tax most fit and why?
In 2007 the total amount of tax collection the federal government brought to the
Treasury from all sources was $2.7 Trillion. The population of the U.S. is about 300
million. Assume that all forms of government taxation were abolished and each citizen
was required to pay exactly the same as everyone else. What would be the tax burden in
dollar terms on each citizen (man, women and child)? How would you characterize a
tax system like this? Who would likely protest the most? Who would benefit the most?
If the new tax was not repealed, what changes do you believe would take place in the
government’s budget?
What does it mean for an industry to be considered an increasing cost industry?