Statistical studies in the United States have reached the conclusion that for low-income
workers
a. the substitution effect is greater than the income effect.
b. the income effect is greater than the substitution effect.
c. the income effect is about equal to the substitution effect.
d. the substitution effect is of the “wrong” sign.
A perfectly competitive firm will not operate where MC = MR but at MC = AC.
a. True
b. False
In a move to free the economy from unnecessary regulation, Congress decides to
remove sugar price supports. What would most likely happen to the number of
producers of sugar?
a. It would decrease, because sugar prices would fall.
b. It would decrease, because sugar prices would rise.
c. It would increase, because sugar prices would fall.
d. It would increase, because sugar prices would rise.
An increase in consumer income will shift both the supply and demand curves.
a. True
b. False
How much the quantity of a good traded changes after a shift of the supply curve
depends on
a. the size of the shift.
b. the slope of the demand curve.
c. whether the market is subject to price controls.
d. All of the above are correct.
It is possible that if a monopoly is broken up, the cost of production for that product
could increase.
a. True
b. False
Suppose the U.S. government has an annual budget of about $3.03 trillion. Does the
U.S. government face the problem of scarcity?
a. No, a government with $3.03 trillion faces no real constraints.
b. No, scarcity does not apply to governments.
c. Yes, resources are limited even for the U.S. government.
d. Yes, although the U.S. government can easily obtain more resources.
e. Uncertain-economic theory has no answer to this question.
It has been found that
a. less-developed countries have more equality of income distribution.
b. more-developed countries have more equality of income distribution.
c. only prior communist countries have more equality of income distribution.
d. income distribution cannot be measured among countries with different political and
economic systems.
An investor will diversify his portfolio to reduce risk.
a. True
b. False
If production involves constant opportunity cost, the production possibilities curve
a. is “bowed inward.”
b. is a straight line.
c. is “bowed outward.”
d. is a wavy line.
e. has an unpredictable shape.
Economists believe mergers can sometimes achieve greater efficiency than two
companies that do not merge.
a. True
b. False
An externality is an event which
a. is external to economics.
b. always brings harm to someone in the economy.
c. is incidental to some market activity.
d. harms the economy as a whole rather than a particular person.
One nation can gain from an exchange only at the expense of another.
a. True
b. False
If every country uses tariffs, everyone is likely to lose.
a. True
b. False
A company draws its total cost curve and total revenue curve on the same graph. If the
firm wishes to maximize profits, it will select the output at which the
a. vertical distance between the two curves is greatest.
b. total cost curve cuts the total revenue curve.
c. horizontal distance between the two curves is greatest.
d. slope of the total revenue curve is greatest.
The people most likely to pay little personal income tax to the U.S. government are
a. the middle class.
b. renters.
c. the very poor.
d. earners of wages (as opposed to salaries).
The concept of economic rent would be more applicable to the earnings of
a. a secretary.
b. Peyton Manning.
c. a doctor or a lawyer.
d. only a landowner.
Many cities have summer pops series in which the local orchestra performs light
classical music in a public park. These performances are free in some areas. Apply the
concept of a public good to pops performances and explain whether an admission
charge is efficient.
Draw the demand, marginal revenue and marginal cost curve for a monopolist. Show
the equilibrium price and quantity supplied and total profit. Show the equilibrium price
and quantity supplied and total profit.
Under what conditions might a monopoly be more efficient than a perfectly competitive
firm?
Table 8-3
Explain how much the firm shown in Table 8-3 should produce, first using total profit
and then using marginal analysis.
Why is it misleading to argue that emissions permits are a “license to pollute”?