Profits
a. are what remains from the selling price after factors have been paid.
b. accrue to entrepreneurs.
c. are lower than most people think.
d. All of the above are correct.
A lottery promises a $250,000 prize. But the prize money is paid out in $50,000 annual
installments with the first installment received today.. The winner is offered the option
of an immediate lump-sum payment. If the interest rate remains at 10 percent for the
entire period, what is the smallest amount the winner should accept?
a. $189,540
b. $192,970
c. $208,494
d. $225,000
Price competition among firms has proved to be more important than the introduction
of new products.
a. True
b. False
A supply schedule can be plotted on a graph to yield a supply curve.
a. True
b. False
If the price elasticity of supply of doodads equals 0,50 and the price rises by 3 percent,
then the quantity supplied of doodads will rise by ____.
a. 0,50 percent.
b. 1,50 percent.
c. 6,00 percent.
d. 15 percent.
Figure 10-1
If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how
much output should it produce?
a. A
b. B
c. C
d. D
Imports from China represent ____ of total U.S. imports.
a. less than 20%
b. approximately 40%
c. approximately 60%
d. more than 80%
Marginal cost
a. equals the slope of the total cost curve.
b. is calculated as DTC/DQ.
c. is the increase in total cost resulting from a one-unit increase in output.
d. All of the above are correct.
Figure 11-6
The profit-maximizing monopolist in Figure 11-6 will produce ____ units of output.
a. Q1
b. Q2
c. Q3
d. Q4
Table 7-5
Table 7-5 shows short-run total cost figures for a stereo manufacturer. The
manufacturer’s short-run fixed cost is
a. 0.
b. $75.
c. $200.
d. $400.
Economists disagree on most economic issues facing an economy.
a. True
b. False
Waiting in line to get a free ticket does not involve any opportunity cost.
a. True
b. False
If the interest rate rises, a profit-maximizing firm will tend to
a. invest in more projects (such as new plants) with payoffs in the future.
b. invest in fewer projects with payoffs in the future.
c. increase both current output and future output.
d. reduce both current output and future output.
Assume Joe invests a total of $10,000 in a company – $5,000 of which is his own
money and $5,000 which he borrowed at a 10% interest rate. If the company’s stock
value increases by 20% in one year at which time Joe sells his shares of the stock, what
is Joe’s rate of return on his investment?
a. 10%
b. 15%
c. 20%
d. 30%
Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon. What
most likely happens next?
a. Service station operators pass along the tax to you, adding the 10 cents to the price of
a gallon of gas.
b. Service station operators grumble, but pay the tax without passing the cost along to
you.
c. Service station operators pass along as much of the tax to you as they can, probably
about 6 cents/gallon.
d. None of these choices.
Tele-Com, Inc., the nation’s largest cable TV company, tested the effect of a price
reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that
the number of customers more than doubled. This means the
a. demand curve for the Disney Channel shifted to the right.
b. supply curve of the Disney Channel shifted to the left.
c. demand for the Disney Channel is elastic in this price range.
d. demand for the Disney Channel is inelastic in this price range.
Millionaires do not face the problem of scarcity.
a. True
b. False
Exhibit 4-1
The following are the equations for the supply and demand curves in the market for
weezils:
Demand: Qd = 20 − 2P
Supply: Qs = 5 + 3P
where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per
weezil in dollars
Refer to Exhibit 4-1. According to the data given, when the market is in Equilibrium,
how many weezils are sold?
a. 3
b. 5
c. 11
d. 14
If an industry consists of five firms each with a 20% market share, then the
Herfindahl-Hirschman index would equal 1,600.
a. True
b. False
The analysis of oligopolistic behavior is difficult because
a. there are few real-world examples of oligopolies for economists to study.
b. oligopolists make decisions independently of each other.
c. firms in oligopolistic industries react to each other’s behavior in many ways.
d. economists have paid little attention to the topic in recent years and so have not yet
applied to it the techniques of modern economic theory.
As long as the market sets prices above marginal costs, production will be efficient.
a. True
b. False
Earnings of some highly skilled or highly specialized persons can be classified as
economic rents.
a. True
b. False
Philip purchased one million dollars’ worth of New York City bonds. His interest
earnings were $100,000. His total federal tax on this income will be
a. $40,000, since his marginal tax rate was 40 percent.
b. $40,000, since only 40 percent of capital gains is taxed.
c. zero.
d. very small, since he had a clever accountant who knew how to use loopholes.