Goods with an income elasticity of demand greater than 1 are called
a. necessities
b. inferior goods
c. normal goods
d. luxuries
e. complements
The study of how nations deal with the problem of scarcity is the domain of
a. economics
b. political science
c. sociology
d. political economy
e. anthropology
Exhibit 14-1
Which of the following is indicated in Exhibit 14-1?
a. Rubber is cheaper to produce than tires.
b. The total cost of producing 100,000 tires is greater than the total cost of producing
200,000 tires.
c. The minimum efficient scale of producing rubber is 4 million pounds.
d. The minimum efficient scale of producing tires is greater than 200,000 tires.
e. The marginal cost of the 200,000th tire must exceed the average cost of 200,000 tires.
The defining characteristic of oligopoly is that each firm
a. produces the same output as its rivals
b. acts independently of its rivals
c. is mutually interdependent
d. is atomistic
e. advertises how its products are different from its rivals’ products
In the short run, a perfectly competitive firm will always shut down if, at all positive
output levels, total revenue is
a. less than total cost
b. less than total cost but greater than variable cost
c. less than total cost but greater than fixed cost
d. greater than fixed cost
e. less than variable cost
The price of a pollution right is
a. determined by consumers
b. determined by government
c. a user charge
d. determined by supply and demand
e. a subsidy
Industrial market countries are also referred to as
a. developing countries
b. low-income economies
c. middle-income economies
d. transitional economies
e. high-income economies
Exhibit 9-19
The firm in Exhibit 9-19, who charges the same price to all customers, will earn how
much profit?
a. none, in fact, they will lose money
b. somewhere between $0 and $30
c. somewhere between $30 and $45
d. somewhere between $45 and $60
e. cannot tell from the information available
Just as the marginal product of labor first rises and then declines so does the
a. average variable cost
b. marginal cost
c. marginal capital of product
d. production function
e. marginal product of capital
The slope of the budget line is measured in units of income.
Exhibit 7-6
Given the information in Exhibit 7-6, what is fixed cost?
a. $0
b. $200
c. $500
d. fixed cost depends on output level
e. we cannot calculate fixed cost without knowing which inputs are fixed
Monopolists can earn positive economic profits in the long run because they are more
productively efficient than perfectly competitive firms.
a. True
b. False
Which of the following would not increase French exports to the United States?
a. an appreciation of the U.S. dollar
b. an appreciation of the euro
c. a depreciation of the euro
d. an increase in French preferences for American goods
e. an increase in real income in France
Exhibit 11-1
Condider Exibit 11-1. Each of the panels depict the supply and demand conditions in a
resource market. In panel (a) how much economic rent do the resources earn?
a. $0
b. $250
c. $500
d. $750
e. $1000
Exhibit 9-3
The profit-maximizing output and price for the firm in Exhibit 9-3, which charges the
same price to all customers, are
a. 117 and $14
b. 150 and $22
c. 150 and $14
d. 117 and $22
e. 117 and $24
The principal advantage of the game theory approach is that it allows us to
a. take all possible information into consideration before developing a theory
b. better understand why the firm in a competitive industry avoids games
c. better understand how the government should regulate a natural monopoly
d. better understand decision making when one person’s choices affect another person’s
choices
e. understand the relationship between the firm and the industry demand curves
Exhibit 4-3
If the price of the good described in Exhibit 4-3 is $1.60, then an economist would
expect the
a. price to decrease to $1.40
b. price to decrease to $1.50
c. quantity supplied to increase to 50 units
d. quantity demanded to increase to 80 units
e. quantity demanded to increase to 90 units
As the relative price paid to a resource in a particular use rises,
a. resources will be drawn from lower-valued uses to higher-valued uses
b. resources will be drawn from higher-valued uses to lower-valued uses
c. resources will generally remain where they are currently employed
d. the supply of that resource will shift to the right
e. the supply of that resource will shift to the left
A rightward shift of the Mexican demand curve for foreign exchange will
a. decrease the price of foreign exchange in Mexico
b. increase the value of the peso
c. make foreign goods less expensive in terms of pesos
d. make foreign goods more expensive in terms of pesos
e. make Mexican goods more expensive in terms of foreign exchange
Exhibit 6-5
In Exhibit 6-5, the total utility of consuming three scones is
a. 34
b. 6
c. 22
d. 12
e. 24
Exhibit 4-2
Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following
would shift the supply curve for milk from S1 to S2?
a. a decrease in the price cattle feed
b. the expectation of a lower price in the near future
c. an increase in the price of milk
d. an increase in the price of beef
e. a decrease in the number of dairy farmers
An increase in the demand for shoemakers will increase the demand for shoes.
a. True
b. False
The Clayton Act prohibits all horizontal mergers, regardless of their economic
consequences.
a. True
b. False
If a firm is experiencing diminishing marginal returns,
a. total output decreases as all resources are increased
b. total output decreases as all resources are decreased
c. total output decreases as one variable resource is increased, other things constant
d. additional increments of output diminish as one variable resource is increased, other
things constant
e. additional increments of output diminish as all variable resources are increased
Savers have less incentive to care what their bank is doing with their money because
their deposits are federally insured. This is a problem of
a. nominal interest
b. adverse selection
c. moral hazard
d. the winner’s curse
e. a positive externality
Which of the following is true about government activity in the United States?
a. Macroeconomic policy is handled mainly at the state level.
b. Higher education is handled mainly at the national level.
c. Primary and secondary education is handled mainly at the local level.
d. Primary and secondary education is handled mainly at the national level.
e. Police and fire protection are handled mainly at the state level.
Of the various types of economic systems, pure market capitalism involves the greatest
government interference and control over the economy.
a. True
b. False
A young chef is considering opening his own sushi bar. To do so, he would have to quit
his current job, which pays $20,000 a year, and take over a store building that he owns
and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would
be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs?
a. $26,000
b. $66,000
c. $78,000
d. $52,000
e. $72,000
If the interest rate increases from 6 percent to 10 percent per year, each $100 saved will
earn
a. $4 per year more than before
b. $6 per year more than before
c. $10 per year more than before
d. $16 per year more than before
e. $60 per year more than before
Messitt and McNulty spend $50,000 each to form a law partnership. On the first day
someone trips over a potted plant in their lobby and sues them for $400,000. Which of
the following is true?
a. If a $400,000 judgment is against the partnership, then each partner will have to pay
$200,000.
b. If a $400,000 judgment is against the partnership and if McNulty cannot afford to
pay any of it, then Messitt is liable for $400,000.
c. Messitt’s liability is limited to $300,000 because she owns three quarters of the firm.
d. Each individual partner cannot be sued for more than $200,000.
e. Only McNulty is personally responsible for the damages because he was the one who
put the potted plant in the office.
Long-run expansion in an increasing-cost industry increases each firm’s marginal and
average costs by
a. saving money on per-unit production costs
b. bidding up the price of resources
c. holding the price of resources constant
d. forcing down the price of resources
e. bidding up each firm’s marginal revenue
An increase in demand will cause a(n)
a. increase in supply
b. decrease in supply
c. decrease in quantity supplied
d. increase in quantity supplied
e. decrease in equilibrium price
One goal of political action committees is to
a. encourage people to become more active in politics
b. engage in rent seeking
c. help raise funds for government agencies
d. evade taxes
e. make it easier for legislators to accept the median voter model
Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when
market demand suddenly falls. What happens to the industry in the long run?
a. It experiences no change form the original equilibrium
b. It experiences a higher equilibrium price and produces more output
c. It experiences a lower equilibrium price but produces more output
d. It experiences the same equilibrium price but produces more output
e. It experiences the same equilibrium price but produces less output