The quantity of labor an individual supplies to any market
a. always increases as the market wage rate rises
b. is contingent upon the wage rates offered in other labor markets
c. always decreases as the market wage rate rises
d. could never be zero over the realistic range of wage rates
e. depends only on the opportunity cost of the individual’s time in other labor markets
If the Irish pound declines in value against other major currencies, which of the
following happens?
a. The Irish trade deficit will increase.
b. The Irish trade deficit will be unaffected.
c. The Irish trade deficit will decrease.
d. Irish products will become more expensive to foreigners.
e. Foreign goods will become cheaper in Ireland.
The prisoner’s dilemma provides an explanation for
a. the price wars that sometimes occur in oligopolies
b. the ability of firms in an oligopoly to extract the entire consumer surplus
c. the collusive behavior that sometimes occurs in an oligopoly
d. the failure of firms in non-competitive industries to maximize profits
e. an irrational behavior that occurs in competitive markets
When drawing a production possibilities frontier, all of the following are usually
assumed except one. Which is the exception?
a. The quantity of resources is rapidly growing.
b. Technology is fixed.
c. Resources can be shifted between production of the two goods.
d. The production possibilities frontier is drawn for a particular time period.
e. Resources are fully and efficiently employed.
Mountain bikers and rollerbladers share the only trail in a city park. The city allows
everybody into the park and onto the trail. The mountain bikers say the rollerbladers are
a hazard to them; the rollerbladers say it’s the other way around. Frequently there are
collisions and many injuries occur. Which of the following ways of dealing with the
problem does not implicitly grant someone a property right?
a. Allow bikers to use the trail on odd-numbered days and rollerbladers to use it on
even-numbered days.
b. Allow bikers to use the trail in the morning and rollerbladers to use it in the
afternoon.
c. Allow only bikers in the park because they have invested in the more expensive
sports equipment.
d. Kick everybody out of the park.
e. Build another trail, put rollerbladers on one and bikers on the other, and give bikers
the right-of-way at intersections.
Cutting down tropical rainforests
a. provides long-term benefits to loggers
b. may mean that possible cures for cancer are lost
c. diminishes potential oil reserves
d. means a reduction of carbon dioxide in the atmosphere
e. means less erosion
The bowed-out shape of the production possibilities frontier indicates increasing
opportunity costs.
a. True
b. False
If MRPlabor/MRClabor > MRPcapital/MRCcapital, then the firm should
a. hire more labor
b. substitute capital for labor
c. not change anything
d. buy more capital
e. decrease the amount of labor
Suppose Ferd truthfully tells the car dealer the maximum amount he’s willing to pay for
a Ford Mustang: $20,000. The dealer says, “You’re in luck; we have one on the lot for
$20,000.” Which of the following statements is true?
a. Ferd will not buy the car.
b. The car is not worth $20,000.
c. Ferd gets $20,000 in consumer surplus.
d. Ferd gets no consumer surplus.
e. The dealer earns $20,000 in consumer surplus.
A tannery discovers a technology that makes it cheaper to reduce the air pollution it
generates in making paper. On a graph of the optimal level of air quality, the use of the
new technology would be represented by
a. a leftward shift of the marginal social cost curve
b. a rightward shift of the marginal social cost curve
c. movement to the right along the marginal social cost curve
d. movement to the left along the marginal social cost curve
e. a downward shift of the marginal net benefit curve
Production by a monopoly would result in the socially optimal allocation of resources if
a. price is set equal to marginal cost
b. marginal revenue is set equal to price
c. marginal revenue is set equal to marginal cost
d. price is set equal to average total cost
e. marginal revenue is set equal to average total cost
As the price of ballpoint pens increases, the demand for felt-tip pens can be expected to
decrease.
a. True
b. False
Exhibit 9-5
The firm in Exhibit 9-5
a. is operating in the short run
b. is operating in the long run
c. will exit the industry in the long run
d. shut down in the short run
e. could be operating in either the short run or the long run
Suppose the income elasticity of demand for a private college education is equal to 1.5.
This means that
a. every $1 increase in income provides an incentive for a $1.50 increase in
expenditures on private college education
b. every $1.50 increase in income provides an incentive for a $1 increase in
expenditures on private college education
c. a 10 percent increase in income causes a 15 percent increase in the demand for a
private college education
d. a 15 percent increase in income causes a 10 percent increase in the demand for a
private college education
e. a 10 percent decrease in private college tuition will have a large enough income
effect to increase spending on private college education by 15 percent
If a firm shuts down in the short run and produces no output, its total cost will be
a. zero
b. equal to total variable cost
c. equal to total fixed cost
d. equal to explicit costs only
e. impossible to calculate
Throughout the world, poverty is greater among women than men, particularly women
who head households.
a. True
b. False
Which of the following is most likely produced in a monopolistically competitive
market?
a. soybeans
b. autos
c. fast food
d. oil
e. local phone service
In the long run, a perfectly competitive market will exhibit
a. zero producer surplus
b. zero consumer surplus
c. positive economic profit
d. allocative and productive efficiency
e. allocative but not productive efficiency
Your opportunity cost of choosing a particular activity
a. can be easily and accurately calculated
b. cannot even be estimated
c. does not change over time
d. varies, depending on time and circumstances
e. is measured by the money you spend on the activity
Revenue for the state governments in the United States comes primarily from income
taxes.
a. True
b. False
Exhibit 11-5
In Exhibit 11-5, what is the equilibrium price for the resource?
a. $16
b. $12
c. $10
d. less than $10
e. unable to determine from information given
In a direct, majority-rule vote,
a. all voters get what they want
b. a majority of voters get exactly what they want
c. only the median voter is completely satisfied
d. a minority of voters are dissatisfied
e. only the median voter is dissatisfied
The average value added per U.S. farm worker is about __________ times that of farm
workers in low- and middle-income countries.
a. one half
b. one
c. ten
d. seventy-five
e. five hundred
Which of the following accounts for the largest source of revenue for the federal
government?
a. sales tax
b. federal property tax
c. personal income tax
d. corporate income tax
e. borrowing
The reward for forgoing present consumption is
a. rent
b. profit
c. roundabout production
d. transfer payment
e. interest
Exhibit 8-3
The shape of the total cost curve between outputs a and b in Exhibit 8-3 reflects
a. fixed cost
b. increasing profits
c. diminishing marginal returns
d. increasing marginal returns
e. economies of scale
If there are only two firms in an industry, the value of the Herfindahl index must be
5,000.
a. True
b. False
If the marginal rate of return expected from a purchase of equipment is greater than the
market interest rate, the firm should
a. not purchase the equipment
b. purchase the equipment
c. either purchase or not purchase the equipment, depending on the marginal resource
cost
d. inform stockholders that the company expects a decrease in earnings from the
purchase
e. seek government assistance in raising market interest rates
The non-wage job features that an employer could alter in response to a higher
minimum wage include
a. the supply of labor
b. the quantity of labor supplied
c. on-the-job training and vacation days
d. barriers to entry
e. Social Security taxes
Labor productivity depends on the
a. quality of the labor
b. the effectiveness of government
c. the proportion of the labor force that is unionized
d. the size of the economy
e. All of the answers are correct