Many experts on the nursing shortage insist that, in addition to higher money wages,
other ways will have to be found to make the nursing profession more attractive,
including, for example, more respect from physicians and administrators, more flexible
schedules, and more secure parking lots. These facts illustrate the concept of
a. exploitation.
b. pecuniary principles.
c. economic rent.
d. nonmonetary attractiveness.
Define the following terms and explain their importance to the study of economics.
a. marginal cost
b. marginal revenue
c. short-run equilibrium
d. supply curve of the firm
e. economic profit
The rule that states that the marginal revenue product equal to price does not hold when
there are more than two inputs.
a. True
b. False
Which of the following is a variable cost for an airline?
a. insurance
b. property taxes
c. jet fuel
d. rent of airport space
A consumer cannot gain consumer’s surplus if she purchases more than one unit of a
good.
a. True
b. False
Equilibrium is reached where there is no inherent force causing quantity supplied or
quantity demanded to change.
a. True
b. False
Economics can decide
a. the appropriate trade-off between fairness and efficiency.
b. which pricing arrangements are fair and which are unfair.
c. whether a pricing decision will impose heavy inefficiency costs on society.
d. All of the above are correct.
Although pollution is caused by a failure of the market, many economists believe that
the best way to protect the environment is to utilize the price mechanism.
a. True
b. False
To construct a supply curve, an economist needs data on price and quantity. Each point
on the supply curve is
a. supply of the product.
b. a quantity supplied at that price.
c. the amount that people want to buy.
d. the amount people want to sell to buyers of different incomes.
e. All of the above are correct.
The law of diminishing marginal utility is consistent with the consumer behavior that
produces a negatively sloped demand curve.
a. True
b. False
One effect of speculators is to iron out price fluctuations because this is the way they
make their profits.
a. True
b. False
When oligopolists join together in a cartel, they
a. have chosen to ignore interdependence.
b. have admitted that their behavior is interdependent.
c. are planning to violate the law of supply and demand.
d. are trying to behave like perfect competitors.
Money is scarce, but resources are not.
a. True
b. False
According to economic theory, under perfect competition, the price of a depletable
resource whose costs of transportation and extraction are negligible
a. is a poor indicator of scarcity.
b. must rise at the rate of interest.
c. will be unable to change to avert running out of it.
d. is too erratic to allow markets to respond to shortages.
A change in input prices will change the location of the budget line.
a. True
b. False
For many years the U.S. government imposed quotas on cheap, Middle Eastern oil
imports. The U.S. consumer consequently paid $3 billion more per year for oil
products. A likely rationale for such a policy is
a. people in the oil industry deserved the transfer.
b. conservation.
c. one cannot be dependent on foreign supplies of so crucial a resource.
d. American oil was of higher quality and deserved a higher price.
Game theory can be used to investigate
a. why cartels break down.
b. why some firms maintain excess productive capacity.
c. how oligopolists set prices.
d. All of the above are correct.
A normal 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 increases.
A profit-maximizing monopolist sets
a. her price where MC = MR.
b. her output where MC = MR.
c. Both a and b are correct.
d. Neither a nor b is correct.
In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,
a. total expenditure remains unchanged.
b. total expenditure increases.
c. total expenditure decreases.
d. total expenditure first increases and then declines.