Exhibit 22-13
What dollar amounts go in blanks (A) and (B), respectively?
a. $200; $100
b. $200; $200
c. $50; $100
d. $10; $100
e. There is not enough information to answer this question.
A bond is
a. a claim on the assets of the corporation that gives the purchaser an ownership right in
the corporation.
b. the share of profits distributed to bondholders.
c. a promise to pay for the use of someone else’s money.
d. a promise of ownership of the government.
e. c and d
Which of the following statements is false?
a. A millionaire definitely receives less utility from an additional dollar than a poor
person.
b. A poor person definitely receives less utility from an additional dollar than a rich
person.
c. A millionaire definitely receives the same utility from an additional dollar as a poor
person.
d. A millionaire generally receives less utility from an additional dollar than a poor
person.
e. We do not know if any of the statements are true or false, because we do not know
how much utility one person receives relative to another.
Exhibit 23-7
What is the profit at 60 units of output?
a. $360
b. $90
c. $75
d. $60
The monopolistic competitive firm faces a __________ demand curve and therefore is a
price __________.
a. downward-sloping; searcher
b. horizontal; taker
c. downward-sloping; taker
d. horizontal; searcher
Which of the following is an example of human capital?
a. a computer
b. an electronic calculator
c. education
d. stocks and bonds
e. all of the above
As interest rates increase, present values __________, and firms will buy __________
capital goods.
a. increase; fewer
b. decrease; fewer
c. increase; more
d. decrease; more
Natural monopolies arise because of economies of scale.
a. True
b. False
The marginal cost of producing the seventh unit of output is
a. $85.00.
b. $12.14.
c. $21.00.
d. $5.00.
With respect to a PPF for goods X and Y, productive efficiency implies that in order to
producemore of goodX there will be a reduction in production of good Y.
a. True
b. False
In a PPF graph of goods X and Y, points that lie beyond (to the right of) the PPF
represent combinations of the two goods that are currently unattainable.
a. True
b. False
If the producers’ surplus is $50, and the consumers’ surplus is $40, then what is the
minimum selling price of the good?
a. $10
b. $40
c. $50
d. $90
e. There is not enough information to answer the question.
The model predicting victory in a two-person race for the candidate closer to occupying
the center of the voter distribution is built on the assumption that
a. people always vote for the Democratic candidate if they are Democrats and for the
Republican candidate if they are Republicans.
b. people vote for the candidate who comes closer to matching their own views.
c. most people don’t vote unless the election is predicted to be close.
d. none of the above
A characteristic of a 45-degree line is that
a. any point on the line is equidistant from the two axes.
b. it bisects a right angle.
c. its slope is 1.
d. a and c
e. a, b, and c
Lemon laws __________ the __________ problem in the used car market.
a. are meant to reduce; adverse selection
b. are meant to reduce; moral hazard
c. unintentionally worsen; adverse selection
d. unintentionally worsen; moral hazard
Public choice deals exclusively with business decisions.
a. True
b. False
Which of the following statements represents a correct and sequentially accurate
economic explanation?
a. A tax is placed on the production of good X, the supply curve of good X shifts to the
left, equilibrium price rises, equilibrium quantity falls, and buyers pay 100 percent of
the tax.
b. A tax is placed on the production of good X, the supply curve of good X shifts to the
left, equilibrium price rises, equilibrium quantity stays constant, and buyers pay 100
percent of the tax.
c. A tax is placed on the production of good X, the supply curve of good X shifts to the
left, equilibrium price does not change, equilibrium quantity rises, and sellers pay 50
percent of the tax.
d. A tax is placed on the production of good X, the supply curve of good X shifts to the
right, equilibrium price falls, equilibrium quantity falls, and sellers pay 100 percent of
the tax.
A public choice theorist would be most likely to say that government failure is a
consequence of the
a. actions of selfish and corrupt politicians.
b. rational behavior of the participants of the political process.
c. irrational behavior of voters.
d. irrational behavior of special interest groups.
Which of the following is not a prediction of the theory on baseball caps and cheating?
a. More people will wear baseball caps on test days than on lecture days.
b. More people will wear baseball caps for multiple choice tests than for essay tests.
c. More people will wear baseball caps when students sit close to each other in class
and are taking a test than when students sit far apart from each other and are taking a
test.
d. b and c
e. none of the above
A perfectly competitive market is initially in long-run competitive equilibrium. Then,
market demand falls. This causes the marginal revenue curves for existing firms to shift
__________ and for these firms to produce __________ output. Some of the existing
firms will end up __________.
a. upward, more, increasing their plant size
b. downward, less, exiting the market
c. downward, more, purchasing more capital equipment
d. upward, less, cutting fixed costs
e. none of the above