Exhibit 6-21
Refer to Exhibit 6-21. In equilibrium the consumer surplus in this market is area A + B.
a. True
b. False
Foreign aid can take the form of
a. only money, capital goods, or technical assistance
b. only capital goods, technical assistance, or food
c. money, capital goods, technical assistance, or food
d. only money, technical assistance, or food
e. only technical assistance or food
Marginal external costs are
a. additional unpriced costs imposed on society by producing one more unit of a good
b. the cost of damaged goods
c. the additional cost of imported goods
d. the total cost to society of producing a good
e. the marginal cost divided by the marginal revenue
Exhibit 20-6
In Exhibit 20-6 the free market exchange rate would be
a. equal to $.50
b. equal to $.53
c. less than $.50
d. greater than $.53
e. indeterminate
The second largest source of tax revenue for the federal government is
a. payroll taxes
b. the personal income tax
c. the corporate income tax
d. excise taxes
e. the sales tax
Which economic question does the decision to produce butter instead of guns answer?
a. What to produce?
b. How to produce?
c. For whom to produce?
d. Who has a comparative advantage in gun production?
e. Who has an absolute advantage in butter production?
Under a tariff, the domestic government gains revenue, but under an import quota it
does not, unless it sells the quota rights.
a. True
b. False
Exhibit 5-26
Refer to Exhibit 5-26. Between points A and B, price elasticity of demand is:
a. unitary
b. elastic
c. inelastic
d. perfectly elastic
e. perfectly inelastic
Starting from a point of tangency between an isoquant and an isocost line, a movement
along the isoquant will
a. increase output but have no effect on cost
b. decrease output but have no effect on cost
c. increase both output and cost
d. have no effect on output but increase cost
e. have no effect on output but decrease cost
If fixed cost at Q = 100 is $130, then
a. fixed cost at Q = 0 is $0
b. fixed cost at Q = 0 is less than $130
c. fixed cost at Q = 200 is $260
d. fixed cost at Q = 200 is $130
e. it is impossible to calculate fixed costs at any other quantity
An inferior good is
a. any good of low quality
b. one that consumers buy less of as the price rises
c. one that consumers buy less of as their income rises
d. one that has few substitutes
e. any good made with inexpensive labor
Principal-agent problems are less likely to arise
a. if it is easy for principals to know agents’ actions and if there is less conflict between
their goals
b. if it is difficult for principals to know agents’ actions and if there is less conflict
between their goals
c. if it is easy for principals to know agents’ actions and if there is some difference in
their goals
d. if it is difficult for principals to know agents’ actions and if there is some difference
in their goals
e. if agents have higher incomes
Exhibit 19-4
In Exhibit 19-4, if the world price of tulips is $4 and there are no trade restrictions, The
Netherlands will
a. produce 10,000, consume 4,000, and import 6,000 tulips
b. produce 10,000, consume 4,000, and export 6,000 tulips
c. produce 4,000, consume 10,000, and import 6,000 tulips
d. produce no tulips
e. import all of the tulips that it consumes
Exhibit 11-4
In Exhibit 11-4, economic rent in equilibrium equals
a. $6
b. $120
c. $1,000
d. $300
e. $1,300
Market work includes activities such as
a. practicing your golf game
b. studying for an economics exam
c. teaching a college economics course
d. picking up empty cans for the bottle deposit
e. picking strawberries for your own use
Which of the following is most likely to be a fixed resource for the City Slicker’s Dude
Ranch?
a. the lodge where the guests stay
b. food for the guests
c. stable hands to take care of the horses
d. hay for the horses
e. water for the horses
The term monopolistic competition
a. is an alternate expression for monopoly
b. is used to describe perfect competition with strong entry barriers
c. denotes an industry with one seller of many differentiated products
d. denotes an industry with many sellers of homogeneous products
e. denotes an industry with many sellers of differentiated products
If the current account shows a deficit, the capital account must show a surplus of the
same amount.
a. True
b. False
Exhibit 4-4
In Exhibit 4-4, which of the following could not cause the shift from D to D’?
a. a decrease in the price of a complement
b. an increase in the price of a substitute
c. a decrease in the price of the good in question
d. an increase in the number of consumers
e. a decrease in income if the good in question is an inferior good
Figure 8-21
Consider Figure 8-21. If the market price is P1, which of the following best describes
the long-run implications for the industry?
a. Profit will attract new resources to the industry and drive the market price down.
b. Profit will attract new resources to the industry and drive prices up.
c. The lack of profit will lead to the maintenance of the status quo.
d. Losses will drive resources from the industry and drive market price down.
e. Losses will drive resources from the industry and drive market prices up.
Which of the following is notcharacteristic of perfect competition?
a. many buyers and sellers
b. brand name advertising
c. standardized products
d. fully informed buyers and sellers
e. free entry and exit of firms
Exhibit 5-21
Which supply curve is more elastic in Exhibit 5-21?
a. Both S and S’ have the same elasticity.
b. S is more elastic at lower prices and S’ is more elastic at higher prices.
c. S is more elastic at higher prices and S’ is more elastic at lower prices.
d. S
e. S’
Exhibit 20-8
Exhibit 20-8 shows the market for euros in the US. Initially the demand for euros is
represented by D1 and the supply of euros is represented by S1. Equilibrium in the
market for euros is at point A. In response to a decrease in the income of US consumers
the equilibrium moves to point H and the euro ________.
a. appreciates in value
b. depreciates in value
c. is devalued
d. is revalued
e. accommodates
Exhibit 5-31
Refer to Exhibit 5-31. The tax burden borne by consumers is:
a. P3DCP1
b. P2BDP3
c. Q2CAQ1
d. b and c
e. P2BCP1
Exhibit 6-23
In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a
and b equals
a. 1
b. 2
c. 1/3
d. 5/6
e. 100
Suppose that a long-run adjustment in a perfectly competitive industry results in
decreased industry output but leaves price unchanged. Which of the following must be
true?
a. The market demand curve did not shift
b. The market demand curve shifted left; the market supply curve shifted right
c. The market supply curve shifted left; the market demand curve shifted right
d. Both market supply and demand increased, but supply increased more than demand
e. The industry is a constant-cost industry
Exhibit 19-3
In Exhibit 19-3, if the world price of corn is $2 and there are no trade restrictions, the
United States will
a. produce 3,000, consume 7,000, and import 4,000 bushels of corn
b. produce 3,000, consume 7,000, and export 4,000 bushels of corn
c. have an excess supply of corn
d. be a net exporter of corn
e. not produce any corn
Which of the following statements cannot be made regarding consumer preferences?
a. Pat enjoys her second cotton candy less than her first.
b. Bill enjoys his second cotton candy as much as the first.
c. Arnie enjoys two cotton candies more than one cotton candy.
d. Arnie enjoys two cotton candies more than Pat enjoys one cotton candy.
e. Bill and Arnie enjoy their second cotton candy less than they do their first.
Which of the following is not a type of trade restriction?
a. low-interest loans to foreign buyers
b. export subsidies for domestic firms
c. domestic content requirements
d. restrictive health and safety standards
e. economies of scale
Each member of a cartel
a. faces a temptation to cheat on the agreement because lowering its price slightly
below the established price will usually increase the firm’s sales and profit
b. faces a temptation to cheat on the agreement because raising its price slightly above
the established price will usually increase the firm’s sales and profit
c. has no temptation to cheat on the agreement because lowering its price slightly below
the established price will usually have no impact on the firm’s sales and profit
d. has no temptation to cheat on the agreement because raising its price slightly above
the established price will usually decrease the firm’s sales and profit
e. has no temptation to cheat on the agreement because lowering its price slightly below
the established price will usually lower the firm’s sales and profit
The demand for a particular brand of automobile is likely to be more inelastic than the
demand for automobiles in general.
a. True
b. False
Assume that you allocate your income to calzones and juice and that you have not yet
spent your entire budget. If the marginal utility of a fourth calzone is 100 and the
marginal utility of a third glass of juice is 50, you would
a. eat a fourth calzone because it has a higher marginal utility
b. drink a third glass of juice because you’ve had less juice
c. consider the total utility received so far from calzones and juice before deciding what
to consume next
d. consider the relative prices of calzones and juice before deciding what to consume
next
e. consider whether or not marginal utility is diminishing before deciding what to
consume next
If the demand curve shifts but the supply curve does not and price remains the same,
supply must be perfectly inelastic.
a. True
b. False
The substitution effect of a price change describes what happens to the shift in demand
for a good when its price changes.
a. True
b. False