The producers of good X are earning (positive) economic profits and the producers of
good Z are receiving economic losses. A likely consequence is that (in time) resources
will be shifted out of producing good Z and into producing good X. Here profit and loss
are most closely serving as
a. signals-telling entrepreneurs where resources should be moved.
b. signals-telling entrepreneurs who is a success and who isn’t.
c. an accounting device-observed by those who have to pay taxes and those who do not
have to pay taxes.
d. signals-telling tax collectors from whom to collect taxes and from whom not to
collect taxes.
The opportunity cost of attending college is
a. the money one spends on college tuition, books, and so forth.
b. the highest valued alternative one forfeits to attend college.
c. the least valued alternative one forfeits to attend college.
d. equal to the salary one will earn when one graduates from college.
A PPF is a straight line as a result of
a. constant opportunity costs.
b. increasing opportunity costs.
c. decreasing opportunity costs.
d. scarcity.
e. choice.
Exhibit 4-4
Which of the following is false?
a. Graph (1): There is a shortage when price is P3.
b. Graph (2): As supply increases, equilibrium quantity remains constant.
c. Graph (3): As demand increases, equilibrium price remains constant.
d. Graph (4): As supply changes, equilibrium price stays the same.
Exhibit 39-4
At a target price of $4 per bushel, how much does the private sector spend on wheat?
a. $2,400
b. $1,800
c. $2,800
d. $3,600
“Present value” refers to the
a. current worth of some future dollar amount of income.
b. future worth of some current dollar amount of income.
c. current worth of some past dollar amount of income.
d. current worth of some current dollar amount of income.
e. past worth of some current dollar amount of income.
If people begin to favor science fiction novels to a greater degree than previously, the
demand curve for science fiction novels
a. shifts rightward.
b. shifts leftward.
c. stays constant.
d. can shift either rightward or leftward.
Situation 22-4
Joe is the owner-operator of Joe’s Haircuts Unlimited. Last year he earned $200,000 in
total revenues and paid $125,000 to his employees and suppliers. During the course of
the year, he received three offers to work for other barbers, with the highest offer being
$50,000 per year.
What are Joe’s accounting profits?
a. $0
b. -$75,000
c. -$25,000
d. $25,000
e. $75,000
Which of the following statements is false?
a. The evidence seems to show that there are only a few, if any, instances of pure
monopsony in the real world.
b. In a monopsony setting, it is possible for a minimum wage to actually increase the
number of workers hired.
c. Although in a monopsony setting it is possible for a minimum wage to actually
increase the number of workers hired, it is not possible to raise wage rates continually
and always increase employment, too.
d. The marginal factor cost for a monopsonist is less than the wage rate it pays workers.
There is a link between production and cost. We know this because
a. there are two periods of production, the short run and the long run.
b. what happens to MPP directs what happens to MC.
c. average fixed cost continually declines as output increases.
d. average productivity falls when marginal productivity is below it.
e. none of the above
Which of the following statements is false?
a. There are no special nonpecuniary aspects to any job.
b. Nonpecuniary aspects of a job refer to the nonmoney aspects of a job.
c. A change in the wage rate can change the quantity demanded and quantity supplied of
labor.
d. A change in the supply of labor can affect the wage rate.
If roundabout methods of production did not ultimately __________, they would
probably not be employed.
a. decrease taxes
b. increase consumption
c. decrease interest rates
d. lower inflation
e. increase the number of persons working
“Rent-seeking” refers to
a. trying to pay the lowest rent possible for an apartment or house.
b. trying to lower rent that is paid on a factory in order to lower fixed costs.
c. the actions of individuals who spend resources to influence public policy in the hope
of transferring income to themselves from others.
d. the fact that the deadweight loss triangle is a genuine cost of monopoly.
e. none of the above
Which of the following statements is a public choice economist most likely to agree
with?
a. People who work for the federal government are naturally lazy, whereas people who
work for private firms are naturally hard working.
b. Good government comes from good people, bad government comes from bad people.
c. Change the institutional arrangements, and you will change behavior.
d. Bad people naturally gravitate toward a career in politics.
e. Good people naturally gravitate toward a career in politics.
Price is the only rationing device that can be used in a modern economy.
a. True
b. False
A firm obeys the least-cost rule for factors X and Y by equating
a. MRPx to MRPy.
b. MPPx/Px to MPPy/Py.
c. Px/MPPx to Py/MPPy.
d. MFCx to MFCy.