Participating in a seminar that helps to improve your performance at work represents an
investment in your ________ capital.
A) human
B) social
C) tangible
D) financial
Related to the Economics in Practice on page 361: Suppose you see the following
advertisement for a vacation rental. “Beautiful condo on the Island of Maui (Hawaii).
Sleeps 5. Great landscaped grounds, pool, and BBQ area. Lanai overlooks pool. $1,500
per week.” It is likely true that the condo
A) doesn’t have a view of the pool.
B) has no view other than the pool (i.e. no ocean, mountain, or city view).
C) is not on the island of Maui.
D) has an actual rental rate of $1600 per week.
The two most important forms of ________ income are interest and profits.
A) rental
B) tax-free
C) intangible
D) capital
The concept of opportunity cost is based on the principle of
A) need.
B) consumption.
C) scarcity.
D) profit.
________ implementing export promotion policies is Japan.
A) One of the most successful countries in
B) One of the least successful countries in
C) The only developed country that has banned
D) The only developed country that has been successful in
Figure 2.6
Refer to Figure 2.6. Which of the following will shift an economy’s production
possibility frontier from ppf2 to ppf1?
A) a decrease in the economy’s capital stock
B) an increase in production efficiency
C) a change in consumers’ tastes
D) economic growth
In the market for used electric wheelchairs, there are high- and low-quality wheelchairs.
Potential buyers cannot determine prior to purchase whether a wheelchair is high or low
quality. The following statement that best describes what is likely to happen in this
market is:
A) The price of a used wheelchair will be very close to the value of a high-quality
wheelchair, which will encourage people to sell high-quality wheelchairs.
B) The price of a used wheelchair will be between the buyer and seller values for
low-quality wheelchairs. This will encourage people to withdraw high-quality
wheelchairs from the market.
C) This is an example of adverse selection, as the buyer will have more information
about the quality of the used wheelchair than will the seller.
D) Over time the market price of a used wheelchair will increase, as there is more of an
incentive for owners of high-quality wheelchairs to sell than owners of low-quality
wheelchairs.
Country A has a comparative advantage compared to Country B in the production of
shoes if
A) Country A can produce shoes at a lower monetary cost than Country B can.
B) Country A can produce shoes using fewer resources than Country B can.
C) the demand for shoes is higher in Country A than in Country B.
D) Country A can produce shoes at a lower cost in terms of other goods than Country B
can.
Assume Dell Computer Company operates in a perfectly competitive market producing
5,000 computers per day. At this output level, price exceeds this firm’s marginal cost. To
maximize profits, Dell should
A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.
Which of the following will definitely occur when there is an increase in demand for
and a decrease in supply of milk?
A) an increase in equilibrium price
B) a decrease in equilibrium price
C) an increase in equilibrium quantity
D) a decrease in equilibrium quantity
Table 3.2
When there is an excess supply of a product in an unregulated market, the tendency is
for
A) price to rise.
B) price to decrease.
C) quantity supplied to increase.
D) quantity demanded to decrease.
What is the formula for the average product of labor?
A) Δq/ΔL
B) ΔL/Δq
C) q/L
D) L/q
Product variety and innovation are ________ associated with the oligopoly model.
A) rarely
B) benefits
C) never
D) only
If a nail salon hires an additional worker, that worker can service 8 additional customers
per day. The average nail service fee is $30. The most the salon would be willing to pay
that groomer is
A) $8 per day.
B) $30 per day.
C) $240 per day.
D) indeterminate with the given information.
Table 2
B’s Strategy
Refer to Table 14.2. If both firms follow a maximin strategy, the equilibrium in the
game is ________.
A) (Advertise, Advertise)
B) (Don’t Advertise, Don’t Advertise)
C) (Don’t Advertise, Advertise)
D) (Advertise, Don’t Advertise)
Figure 3
Refer to Figure 6.3. Molly’s budget constraint is AD. It would swivel to AB if the price
of
A) cassette tapes increased.
B) cassette tapes decreased.
C) CDs increased.
D) CDs decreased.
A university requires that all entering first-year students learn how to use word
processing and spreadsheet software. This is an investment in what type of capital?
A) tangible
B) financial
C) human
D) productive
Below are cost curves for Dom’s Barber Shop, a monopolistically competitive firm.
Figure15. 1
Refer to Figure 15.1. In this industry, in the long run,
A) firms will continue to earn economic profits.
B) firms will enter until all firms earn a normal profit.
C) demand for the product will decrease so that profits are decreased.
D) the government will impose price controls to eliminate any economic profits.
In the distribution of world income, the poorest ________ of the world’s population
earns about 0.5% of the world income.
A) one-tenth
B) one-fifth
C) one-fourth
D) one-half
Related to the Economics in Practice on page 298: The Department of Justice’s case
against the Taiwanese firm AU Optronics was centered around
A) breaking its monopoly.
B) product dumping.
C) illegal mergers.
D) price fixing.
Assume that the current interest rate is 7%. You invest $10,000 of your own money in a
restaurant that you own and operate. The normal return on this investment is
A) $0, as you used your own money.
B) $700, as that is the interest forgone by not lending the money to someone else at a
7% interest rate.
C) $10,000, as that is the amount invested in the restaurant.
D) $10,700, the amount invested plus the interest charge on the investment.
A movement along the demand curve to the right may be caused by a(n)
A) decrease in income.
B) increase in supply.
C) fall in the number of substitute goods.
D) rise in the price of inputs.
A theory of fairness that holds that taxpayers should contribute to the government in
proportion to the benefits they receive from public expenditures is the
A) ability-to-pay principle.
B) equity principle.
C) benefits-received principle.
D) equality-for-all principle.
Production is the process by which
A) products are used by consumers.
B) resources are transformed into useful forms.
C) products are converted into capital.
D) resources are allocated and distributed.
The ________ is the percentage of a tax base that must be paid in taxes.
A) tax base
B) tax incidence
C) proportional tax
D) tax rate structure
If one person’s enjoyment of the benefits of a good ________ with another’s
consumption of it, the good is nonrival in consumption. This is a characteristic of a
________ good.
A) interferes; public
B) interferes; private
C) does not interfere; private
D) does not interfere; public
Labor and capital are substitutes in production. If labor becomes less educated, then,
ceteris paribus,
A) capital is substituted for labor.
B) labor is substituted for capital.
C) output decreases as does the rental rate.
D) output increases as does the price of the output.
You lend a friend $10,000 for a year. At the end of the year your friend agrees to pay
you $10,700. The interest rate on this loan is
A) 07%.
B) 00%.
C) 107%.
D) indeterminate from this information.
Hi Phi Sound Unlimited has a monopoly over the installation of surround sound
systems. If Hi Phi Unlimited’s total revenue from installing 15 sound systems is
$30,000 and its total revenue from installing 18 sound systems is $33,000, what is the
marginal revenue of the eighteenth sound system?
A) -$3,000
B) $1,000
C) $1,500
D) $3,000
If the marginal product of labor is less than the average product of labor, then the
A) marginal product must be increasing.
B) average product must be decreasing.
C) marginal product must be decreasing.
D) Both B and C
You have observed that every time you do 30 minutes of cardio exercise before taking
an exam you get an A. You therefore conclude that to get an A on an exam, all you have
to do is 30 minutes of cardio exercise before you take an exam. You have committed the
A) fallacy of composition.
B) fallacy of inductive reasoning.
C) post hoc, ergo propter hoc fallacy.
D) fallacy of division.
Benefit levels for the Temporary Assistance to Needy Families (TANF) are set by
________ governments.
A) state
B) federal
C) local
D) municipal
The primary assumption made in ________ justice is that people are risk ________.
A) Rawlsian; averse
B) Rawlsian; loving
C) utilitarian; averse
D) utilitarian; loving
A firm is operating such that the marginal product of labor is 10 and the marginal
product of capital is 40. The firm is minimizing its costs only if
A) the wage is one fourth the rental rate.
B) the rental rate is one fourth the wage.
C) Since capital is more productive than labor, the firm must be minimizing cost.
D) Given this information, the firm can’t be minimizing cost under any circumstances.
Pineapples and kumquats are substitute goods. A hurricane in Guatemala destroyed a
good portion of the pineapple crop. Ceteris paribus
A) the price of both pineapples and kumquats will increase.
B) the price of both pineapples and kumquats will fall.
C) the price of kumquats will increase, and the price of pineapples will fall.
D) the price of kumquats will fall, and the price of pineapples will increase.
Explain what happens when nations don’t trade. In addition, explain what happens
after they decide to trade.
What is the free-rider problem?
What arguments can be made in favor of product differentiation and advertising?
Evaluate the following statement. “As long as I am still enjoying this candy I am going
to keep buying and eating more of it”.
Assume that policy makers in the state of California respond to the fury by residents of
recent price hikes for the price of water and respond by capping water prices in 2010 to
$.10 per gallon that they were a few years ago rather than what the market price
otherwise would be at $.25 per gallon. Explain with the use of a graph what would
happen if the state legislature were to impose such a price control.
Explain what is meant by marginal product.
Explain import substitution.
Use the table below to answer the following questions. Calculate the total cost of
production if labor and capital costs are equal at a $1 each. The recalculate the costs
when only the price of labor rises to $5 but capital costs remain at $1. Identify the least
cost technology in both cases.
Antitrust cases that are brought to the courts by the Justice Department typically rely on
perfect competition as a benchmark for lawyers to determine whether a firm is
competitive or monopolistic. Why is this a troublesome criterion to use in prosecuting
such cases?
Explain why a single labor supply curve can have both a positive and negative
elasticity.
Suppose there is a new technological invention that will allow you to put any resource
into a special black box and in an instant anything that you program it to produce will
be produced? Does this invention end scarcity? Why or why not?
Assume the United States has an absolute advantage in the production ofeverything
compared to the African nation of Berundi. Can you think of any reason why both
nations would still find it to their mutual advantage to trade with each other?
As a manager of a shoe-repair shop, you estimated that the total product of labor used to
repair shoes varies according to the following data but some of your figures were
deleted by a clerk:
Fill in missing data in the table above.
Comment on the following statement: “In an oligopoly, the behavior of any one firm
depends on the reaction it expects of all the others in the industry.”
Use a diagram of a competitive labor market and a representative firm to explain how
much labor a profit-maximizing firm will hire.
Using an example, explain the difference between a labor-intensive technology and a
capital-intensive technology.
Explain why economists today tend to favor a comprehensive personal consumption
tax.