One reason why firms would choose a salary system rather than a commission
compensation system is that their employees might become less concerned about the
quality of their work.
If the price of peaches, a substitute for plums, decreases, the demand for plums will
increase.
The total cost schedule shows the relationship between different amounts of inputs and
the resulting level of output.
Advertising is the action of a firm that is intended to maintain the differentiation of its
product over time.
Adverse selection refers to the actions people take after they have entered into a
transaction that make the other party to the transaction worse off.
An increase in wages raises the opportunity cost of leisure and leads to an increase in
the quantity supplied of labor.
Table 9-12 Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts. Table 9-12 shows the
production and consumption quantities without trade, and the production numbers with
trade.
If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded, how many
swords will Estonia gain compared to the “without trade” numbers?
A) 5
B) 45
C) 100
D) 105
Organizing a successful firm in a market economy has become ________ over the last
century.
A) legally impossible
B) politically impossible
C) less difficult
D) more difficult
Which of the following is a positive economic statement?
A) People should not buy imported fruits and vegetables.
B) The government should subsidize solar power for homeowners.
C) The minimum wage law causes unemployment.
D) The number of work visas should not be limited by the government.
Table 13-2
Eco Energy is a monopolistically competitive producer of a sports beverage called
Power On. Table 13-2 shows the firm’s demand and cost schedules. What is Eco
Energy’s profit?
A) $125
B) $140
C) $145
D) $150
“Because apples and oranges are substitutes, an increase in the price of oranges will
cause the demand for apples to increase. This initial shift in demand for apples results in
a higher price for apples; this higher price will cause the demand curve for apples to
shift to the right.” Which of the following correctly comments on this statement?
A) The statement will be true if consumer tastes for apples and oranges do not change.
B) The statement is false because a change in the price of apples would not change the
demand for apples.
C) The statement is false because oranges are inferior goods; apples are normal goods.
D) The statement is false because one cannot assume that apples and oranges are
substitutes for all consumers.
Disease, poor nutrition, and substandard health care in developing nations can reduce
growth in an economy by
A) reducing physical capital.
B) reducing human capital.
C) increasing labor productivity.
D) increasing technological change.
Relative to a perfectly competitive market, a monopoly results in
A) a gain in producer surplus equal to the gain in consumer surplus.
B) a gain in producer surplus equal to the loss in consumer surplus.
C) a gain in producer surplus less than the loss in consumer surplus.
D) greater economic efficiency.
According to new growth theory,
A) physical capital is nonexcludable.
B) knowledge capital is excludable.
C) knowledge capital is subject to increasing returns.
D) knowledge capital is rival and excludable.
Jack just received a promotion at work and now works 50 hours per week instead of 35.
As a result,
A) the unemployment rate increased.
B) the unemployment rate decreased.
C) the labor force participation rate increased.
D) neither the unemployment rate nor the labor force participation rate changed.
An unplanned decrease in inventories results in
A) a decrease in planned investment.
B) an increase in planned investment.
C) actual investment that is greater than planned investment.
D) actual investment that is less than planned investment.
Trade between countries that is without restrictions is called
A) unobstructed commerce.
B) unabated trade.
C) free trade.
D) unencumbered trade.
Figure 29-1
Currency speculators believe that the value of the euro will increase relative to the
dollar. Assuming all else remains constant, how would this be represented?
A) Supply would decrease, demand would decrease and the economy moves from B to
C to D.
B) Supply would increase, demand would decrease and the economy moves from C to
B to A.
C) Supply would decrease, demand would increase and the economy moves from A to
D to C.
D) Supply would increase, demand would increase and the economy moves from D to
A to B.
How much is a bond that pays $50 in coupon payments for 3 years and $1,000 at the
end of the third year worth if the interest rate is 10%?
A) $876
B) $952
C) $1,045
D) $1,150
Consumption expenditures do not include household purchases of
A) medical care.
B) education.
C) new houses.
D) durable goods.
Technological advancements have led to lower prices and an increase in the sale of
color laser printers. How does this affect the market for laser printer ink cartridges?
A) The demand curve for laser printer ink cartridges shifts to the right.
B) The demand curve for laser printer ink cartridges shifts to the left.
C) The quantity of laser printer ink cartridges demanded increases.
D) The quantity of laser printer ink cartridges demanded decreases.
The government of Bassaland is looking for new revenue sources. It is considering
imposing an excise tax on two goods: palm wine and diapers. If the price elasticity of
demand for the goods are -0.47 and -1.89 respectively, which good should it tax if the
goal is to raise revenue? If the government wants to tax only one good, which good
should it tax if the goal is to discourage consumption? Explain your answer.
State the Coase theorem.
The Bureau of Labor Statistics counts as employed people who work part-time, but
would prefer to work full-time. Suppose the people who had part-time jobs, but wanted
full-time jobs, were counted as unemployed. Explain how the unemployment rate and
the labor force participation rate would change.
Explain whether a monopoly that maximizes profit will also be maximizing revenue
and production.
What is deadweight loss? When is deadweight loss equal to zero?
What is a public franchise? Are all public franchises natural monopolies?
Who is the seller in a primary market and who is the seller in a secondary market?
Use the general relationship between marginal and average values to explain why a
marginal cost curve must intersect an average total cost curve and an average variable
cost curve at their minimum points.
What are inventories? What usually happens to inventories at the beginning of a
recession, and what usually happens to inventories at the beginning of an expansion?