If the U.S. government decides to increase military spending, one opportunity cost will
be lower spending on education.
a. True
b. False
If the equilibrium rate of interest would be 10 percent, but the usury law sets 8 percent,
a. the quantity of funds supplied would be greater than the quantity demanded.
b. economic efficiency would be promoted.
c. some applicants for loans would likely be turned down.
d. lenders would be able to fund fully all requests for loans.
Which of the following exchanges handles numerous technology companies including
Intel and Microsoft?
a. NASDAQ
b. NYSE
c. AMEX
d. None of the above handle technology stocks.
Decision making that seeks only solutions that are acceptable is called
a. optimizing.
b. satisficing.
c. benchmarking.
d. maximizing.
With a monopoly, the total surplus is lower than it would be with a perfectly
competitive industry.
a. True
b. False
The United States Social Security system
a. pays benefits in direct accordance to what each individual has paid into the system.
b. has paid the current generation of recipients less in benefits than it paid in payroll
taxes.
c. has paid the current generation of recipients more than it paid in payroll taxes.
d. paid the earlier generations more and the current generation less than each paid in
payroll taxes.
Which of the following does not determine the position and shape of a society’s PPF?
a. physical resources
b. price level
c. skills and technology
d. past construction of factories and research
High price and low total utility indicate
a. low marginal utility.
b. large quantities are sold.
c. high marginal utility.
d. a high price/marginal utility ratio.
An inferior good is a good whose quantity demanded
a. rises when its price falls.
b. falls when the price of a related good falls.
c. falls when the consumer’s total utility rises.
d. rises when the consumer’s real income falls.
Voluntary programs, direct controls, and emissions taxes are all equally effective ways
of controlling pollution.
a. True
b. False
Richard Bland quit his job as an accounting professor to start his own restaurant. He
gave up a salary of $50,000 per year and withdrew $100,000 in bank CDs earning 5
percent to buy a building and equipment. In the restaurant’s first year it had direct
expenses of $75,000 and revenues of $150,000. The restaurant’s economic profit was
a. $15,000.
b. $20,000.
c. $75,000.
d. not possible to determine from the information given.
Is increased capital spending the only way for an economy to expand its production
possibilities frontier?
a. No, an economy can also expand by invention and innovation.
b. No, an economy can also grow by investment instead of capital spending.
c. Yes, more capital is the only way to expand its production possibilities frontier.
d. Yes, although more capital clearly has a high opportunity cost.
e. Yes, because capital is the only constraining resource that limits growth.
When a shortage occurs in the market for a good, quantity
a. demanded exceeds quantity supplied and the market mechanism pushes the price up,
which in turn encourages more production and less consumption.
b. supplied exceeds quantity demanded and the price falls, which encourages more
production and less consumption.
c. demanded exceeds quantity supplied and the market mechanism pushes the price
down, which encourages more production and less consumption.
d. supplied exceeds quantity demanded and the price rises, which encourages more
production and less consumption.
Capitalism and free enterprise are common, and the United States
a. has just begun to move in that direction after years of central planning.
b. has gone further in that direction than almost any other country.
c. is becoming more “free,” but is not as capitalistic as many others.
d. is considering a major change to “free up” its economy as many others have.
e. is leading the move toward greater central planning and control.
Refer to Table 4-1. What is the equilibrium price in the example above?
a. $9
b. $8
c. $7
d. $6
e. $5
Marginal social costs are the sum of marginal private costs and incidental costs.
a. True
b. False
The economic theory of discrimination suggests that the practice of apartheid in South
Africa should have
a. worsened the economic condition of only the blacks.
b. worsened the economic condition of only the whites.
c. worsened the economic condition of whites as well as others.
d. improved the economic condition of the whites.
Monopolistic competition in long-run equilibrium is characterized by
a. excess capacity.
b. higher cost per unit of output than under perfect competition.
c. inefficiency in use of resources.
d. All of the above are correct.
By changing the amount of income a consumer has to spend, a change in the price of
one good may affect the quantity demanded of another good.
a. True
b. False
Gross domestic product is
a. the largest industry in an economy.
b. the money value of all final goods and services produced in a year.
c. the volume of goods and services which are subject to international trade.
d. goods and services produced by private companies.
e. non-market production of goods and services.
A monopolist can sell 10 wangdoodles if he charges $10 per wangdoodle and 11
wangdoodles if he charges $9. The MR from selling the 11th wangdoodle is
a. −$1.
b. $1.
c. $9.
d. $99.
Figure 4-11
The Russian government has restricted sugar availability to reduce the supply of illegal
liquor (sugar is used to increase alcohol content). Russians also like to sweeten their tea
with jam, another sugar product. Which graph in Figure 4-11 depicts the impact of
sugar rationing on the Russian tea market?
a. 1
b. 2
c. 3
d. 4
A rational decision is one that
a. satisfies all desires.
b. avoids the intentional allocation of resources.
c. assigns available resources in the manner most preferred by decision makers.
d. assigns available resources to the uses with the lowest opportunity costs.
The monopolistically competitive firm differs from monopoly in that its
a. demand curve is flatter.
b. demand curve slopes downward.
c. MR curve lies below its demand curve.
d. profit is maximized where MR = MC.