A graph with a positive slope indicates that the variables depicted on the axes move in
the same directions.
a. True
b. False
A tax is more likely to promote economic equality if it is
a. regressive.
b. proportional.
c. indirect.
d. progressive.
Since women earn less on average than men, we would expect that the substitution
effect of a wage change would be more likely to dominate for women and the income
effect would be more likely to dominate for men.
a. True
b. False
Even if all individual demand curves are downwardly sloped, the market demand curve
may slope upward.
a. True
b. False
The ability-to-pay principle is most closely tied to the concept of
a. horizontal equity in taxation.
b. fiscal federalism.
c. vertical equity in taxation.
d. the benefits principle of tax equity.
In the collective bargaining process
a. supply and demand analysis is used to determine the wage.
b. the contract can legally cover only the wage or salary determined.
c. there is often heated discussion with threats of strikes and counterthreats of lockout.
d. the negotiation period is limited to thirty days.
One motive for “battling the invisible hand” is
a. unhappiness about the prices that occur in free markets.
b. envy toward those who apparently benefit from certain prices.
c. a desire to have government “correct” some problems.
d. an attempt to produce justice between buyers and sellers.
e. All of the above are correct.
Which of the following acts prohibited predatory pricing?
a. Robinson-Patman Act
b. Tunney Act
c. Clayton Act
d. Sherman Act
The pricing system has a failure built into it when externalities exist.
a. True
b. False
Many countries impose tariffs or quotas to protect the domestic industry from
competition.
a. True
b. False
The perfect competition price system is the most efficient because it equates MC = P =
MU.
a. True
b. False
Economists generally prefer to deal with emissions of pollutants
a. with direct controls.
b. by encouraging people not to pollute.
c. by subsidizing the installation of pollution-control equipment.
d. by taxing emissions.
Entry barriers can lead to long-run economic profits.
a. True
b. False
The market demand curve represents the total quantity demanded at each price.
a. True
b. False
Which of the following is concerned with the distribution part of resource allocation?
a. An economy decides to produce equal quantities wheat, rice, and clothes.
b. An economy decides to use 25% of the available capital for producing clothes.
c. An economy decides to ration 40% of its output to low income groups.
d. An economy decides to use more labor for producing wheat and rice.
When a firm or economy is operating efficiently, it is operating
a. outside its production possibilities frontier.
b. inside its production possibilities frontier.
c. on its production possibilities frontier.
d. at the intersection of the production possibilities frontier and the vertical axis.
e. at the intersection of the production possibilities frontier and the horizontal axis.
Employers near military bases are aware that wives generally accompany their
servicemen husbands when they are transferred. When presented with nonservice-wife
applicants and wives of servicemen, they hire the nonservice-wife applicants. This is an
example of
a. gender discrimination.
b. statistical discrimination.
c. economic discrimination.
d. prejudicial discrimination.
Taxation may improve the social welfare when the taxed good
a. is socially undesirable (like, in some views, liquor and pornography).
b. imposes negative externalities.
c. is overproduced under a free-market system.
d. All of the above are correct.
Compared to people in other nations, people in the United States pay
a. much higher taxes.
b. somewhat higher taxes, on average.
c. about the same amount taxes.
d. lower taxes.
An efficient allocation of resources is demonstrated by a point
a. above the production possibilities frontier.
b. below the production possibilities frontier.
c. on the production possibilities frontier.
d. near the middle of the production possibilities frontier.
Which of the following holds true in a market when the invisible hand functions
properly?
a. MC = MU = P
b. P = MRS
c. P = MC but not P = MU
d. P = MU but not P = MC
Monopolistic competition has at least one similarity to perfect competition: firms are
free to enter and leave the industry.
a. True
b. False
Which economist created the theory of creative destruction?
a. William Nordhaus
b. Joseph Schumpeter
c. Adam Smith
d. Milton Friedman