A profit-maximizing monopolist will stop production while MR is still greater than MC.
a. True
b. False
In a free market, a given unit of an input will be used by the firm that
a. earns the largest addition to total profit from the use of that unit of input.
b. has the lowest marginal cost of producing another unit of output.
c. sells its output for the highest price.
d. earns the largest total profit.
In the case of a beneficial externality
a. marginal private cost is below marginal social cost.
b. marginal social cost is above marginal private cost.
c. marginal social cost and marginal private cost are equal.
d. the free market price is below the socially efficient price.
Rent seeking is a way of earning profit without adding to the product’s value.
a. True
b. False
Adam Smith noted that people are adept at pursuing their own self-interests, and that
____ harnesses this self-interest remarkably well.
a. a totalitarian regime
b. a market system
c. a democratic government
d. a closed system
If the slope of an indifference curve between two goods decreases as we move from left
to right (dropping all minus signs), we infer that the consumer
a. is less willing to trade away a good when he has a lot of it.
b. is more willing to trade away a good when he has a lot of it.
c. always tries to keep the percentage of his budget spent on each good constant.
d. views one of the goods as inferior.
Externalities can create a threat to environmental quality.
a. True
b. False
Mrs. Dodge has $8 million in income and pays no income taxes. Her income is most
likely
a. capital gains.
b. interest on corporate bonds.
c. interest on municipal bonds.
d. offset by mortgage interest.
As a result of pure free trade in a commodity the
a. price of the commodity must be the same in all countries.
b. total quantity imported will exceed the total quantity exported.
c. price of the commodity will be higher in the producing country.
d. price of the commodity will be lower in the producing country.
A demand curve shows the relationship between price and quantity demanded only so
long as all other things are held constant.
a. True
b. False
Opportunity cost is best defined as the value of
a. all of the other possible options that the decision maker could have chosen.
b. the alternative which the decision maker would choose if more resources were
available.
c. what is gained from the alternative which is chosen.
d. resources that are given up to obtain the alternative that is chosen.
e. the next best alternative that the decision forces one to give up.
When price is above the equilibrium level, competitive price cutting will continue as
long as quantity supplied exceeds quantity demanded.
a. True
b. False
Average cost equals
a. change in total cost/change in quantity.
b. total cost/quantity.
c. total cost − total variable cost.
d. total cost − total fixed cost.
Regardless of quantity in long-run equilibrium, the industry price cannot exceed the
a. long-run average cost of supplying that quantity.
b. total variable cost of supplying that quantity.
c. long-run total cost of supplying that quantity.
d. minimum long-run marginal cost of supplying that quantity.
A monopoly may breed inefficiency by reducing competition and restricting production.
a. True
b. False
Figure 22-7
In Figure 22-7, it is probably true that wages are
a. equal in Pestoland and Pastaland.
b. greater in Pestoland than Pastaland.
c. greater in Pastaland than in Pestoland.
d. higher in pasta production than in pesto production in both countries.
Suppose the goal of a union is to maximize the total income of all workers it represents.
In this case it will probably aim for a wage at which the elasticity of demand for
workers is
a. 0.
b. infinite.
c. 1.
d. ranging from 2 to 5
Under an emissions tax program, the government sets ____; under an emissions permits
program, the government sets ____.
a. the price of the right to pollute; the price of the right to pollute
b. the price of the right to pollute; the permitted total quantity of pollution
c. the permitted total quantity of pollution; the price of the right to pollute
d. the permitted total quantity of pollution; the permitted total quantity of pollution
One problem with the European Union’s choice regarding equality versus efficiency is
that it may inadvertently shrink the size of its “economic pie”.
a. True
b. False