To a firm facing constant input prices, increasing marginal returns
a. means that each additional unit of output costs more to produce than the previous unit
b. means that the marginal product of the variable input decreases as more of the input
is used
c. can occur due to specialization and division of labor
d. usually occur at very high rates of output
e. can never occur
The Equal Employment Opportunity Commission was established by
a. the Social Security Act
b. the Reagan administration
c. the Civil Rights Act
d. the Equal Rights Amendment
e. the Wagner Act
Suppose that a monopolist must choose between two points on its demand curve; it can
sell 100 units for $3 each, or it can sell 160 units for $2 each. Which of the following is
true?
a. The monopolist is facing an elastic demand.
b. The monopolist is facing unit elastic demand.
c. The monopolist is facing inelastic demand.
d. The monopolist is facing perfectly elastic demand.
e. The elasticity of demand cannot be determined with the information given.
Exhibit 13-9
In the market for loanable funds depicted in Exhibit 13-9, what is the equilibrium
amount of loanable funds exchanged?
a. $4 million
b. $5 million
c. $6 million
d. $7 million
e. $8 million
An increase in the price of a resource will cause a movement along the demand curve
for that resource.
a. True
b. False
In the short run, a monopolistically competitive firm is
a. guaranteed to earn zero economic profit
b. guaranteed to earn economic profit
c. guaranteed to earn an economic loss
d. guaranteed to earn either zero or positive economic profit
e. not guaranteed any level of economic profit
The value of cross-price elasticity of demand between orange soda and grape soda is
a. negative
b. positive
c. 0
d. between -1 and 0
e. less than -1
Because of the rise of global competition and free trade,
a. antitrust policy serves no purpose
b. antitrust policy may be less necessary than previously thought
c. U.S. industrial concentration poses more of a threat to consumers
d. U.S. markets are becoming less contestable
e. U.S. manufacturers are seeking fewer trade barriers
The U.S. dollar will appreciate if
a. the U.S. demand for foreign exchange decreases
b. the U.S. demand for foreign exchange increases
c. the U.S. supply of foreign exchange decreases
d. Americans want to buy more foreign goods
e. foreigners want fewer American goods
If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the
marginal cost of the twentieth unit
a. is $100
b. is $5
c. is $40
d. is $8
e. cannot be determined without total cost
The difference between a specific tariff and an ad valorem tariff is that a specific tariff
a. is a set amount of money per unit of a product, while an ad valorem tariff is a set
percentage of product price
b. is a set percentage of product price, while an ad valorem tariff is a set amount of
money per unit of a product
c. names a particular good to which the tariff applies, while an ad valorem tariff applies
to large classes of products
d. applies only to imports, while an ad valorem tariff applies only to exports
e. sets a strict quota limit on the amount one individual can purchase, while an ad
valorem tariff sets no such limit
Which of the following represents a perfectly competitive farmer’s demand curve for
hired hands?
a. her ATC curve
b. her AVC curve
c. her MRP curve
d. her MRC curve
e. her AFC curve
In an increasing-cost industry, the entry of new firms
a. decreases equilibrium price
b. increases average cost at each level of output
c. shifts the industry demand curve to the left
d. increases economic profits in the industry
e. shifts the long-run industry supply curve to the right
A change in demand for a resource can be caused by
a. proportion of economic rent in the total earnings of the resource
b. opportunity cost of the resource
c. price of the resource
d. a change in the number of firms producing the final product
e. ease with which resources can be put to alternative uses
Which resource earns the highest economic rent as a proportion of total earnings?
a. a resource specialized in one task
b. a nonspecialized resource
c. a resource with inelastic demand
d. a resource in low demand
e. a resource with elastic demand
Which of the following contributed most to the large increases in poverty since 1960?
a. increases in air pollution and other externalities
b. federal government budget deficits
c. the increase in the number of elderly individuals
d. rising poverty rates among households headed by females
e. the increase in the number of households headed by females
Which of the following best explains why marginal cost eventually increases as output
increases?
a. economies of scale occur
b. average cost increases
c. total cost increases
d. marginal product decreases
e. fixed cost is constant
Suppose that, in the short run, a perfectly competitive firm earns a normal profit. Which
of the following is incorrect?
a. MR = price
b. MR = ATC
c. AR x Q = TR
d. TR = TC
e. P = AVC
Exhibit 6-1
Consider Exhibit 6-1 which shows the total utility derived from various numbers of
glasses of milk consumed in a day. The marginal utility of the fourth glass of milk is
a. 0 units of utility
b. 5 units of utility
c. 8 units of utility
d. 12 units of utility
e. 14 units of utility
The opportunity cost of a particular activity
a. must be the same for everyone
b. is the value of all alternative activities that are forgone
c. has a maximum value equal to the minimum wage
d. varies from person to person
e. can usually be known with certainty
A $100 annuity is
a. $100 received in a single year
b. $100 received each year forever
c. more or less than $100, dependent on the interest rate, received for a certain number
of years
d. $100 received each year for a certain number of years
e. more or less than $100, dependent on the interest rate, received until an upper limit is
reached
Exhibit 7-6
In Exhibit 7-6, which costs are fixed costs?
a. rent, labor costs, and material costs
b. rent and labor costs
c. rent and material costs
d. labor and material costs
e. rent only
If price equals 0, then consumer surplus
a. is 0
b. is maximized
c. is price times quantity
d. is equal to marginal utility
e. cannot be determined
In order to sell an additional unit of its product, a monopolist must decrease price on all
units.
a. True
b. False
A fair distribution of income for the U.S. economy is
a. not an economic issue
b. defined by the Department of Agriculture
c. a positive economic question
d. a normative economic question
e. a state and local issue but not a national one
Environmental problems result when social costs and benefits are different from private
costs and benefits.
a. True
b. False
If Family Travel Agency, a monopolistic competitor, offers services that are
differentiated from the services of other producers in the industry, it
a. faces a perfectly elastic demand curve
b. is a price taker
c. has some power to control the price it charges
d. faces a perfectly inelastic demand curve
e. produces a product with no close substitutes
In the last 30 years, the number of poor people in the United States in households
headed by women has
a. been constant
b. increased slightly
c. increased dramatically
d. decreased slightly
e. decreased by half
An industrial union can obtain a wage higher than the competitive level
a. without any change in total employment
b. at the cost of a reduction in total employment
c. and achieve higher total employment as well
d. and achieve the same or higher total employment
e. thus increasing the quantity of labor demanded
Exhibit 19-5
If the country illustrated in Exhibit 19-5 is initially trading without restrictions at a
world price of $1.00, the loss of consumer surplus as a result of a tariff of $0.50 per unit
is represented by area
a. a
b. b + d
c. c + i + e + f
d. c
e. d
Price discrimination that substantially lessens competition is prohibited by the Clayton
Act.
a. True
b. False
The price elasticity of today’s supply curve of classrooms on campus is likely to
a. be greater than 1
b. be less than 1
c. be equal to 1
d. approach zero
e. be infinity
If the average height in the classroom were 5 feet 10 inches and Patrick Ewing, who is
7 feet tall, came in and sat down,
a. the average height would rise to 7 feet
b. the marginal height would be 5 feet 10 inches
c. the average height would not change
d. the average height would rise somewhat
e. the marginal height would rise