Exhibit 12-9
In Exhibit 12-9, the labor supply and labor demand in a unionized labor market is
represented by the demand curve D0 and Supply curve S0. Which of the market
equilibria is the most likely outcome of a successful union campaign by the United
Autoworkers to restrict the import of imported automobiles?
a. a
b. b
c. c
d. d
e. either a or d
Economies of scope is the term used to describe an industry that is composed of firms
having substantial economies of scale.
a. True
b. False
Zipco’s accounting profit is equal to its
a. total revenue minus opportunity costs
b. total revenue plus opportunity costs
c. total revenue minus imputed costs
d. total revenue minus explicit costs
e. total revenue minus explicit and implicit costs
Jewelers are willing to hold large inventories of diamonds
a. because the demand for diamonds is large and growing
b. because that minimizes the fixed cost of producing diamond jewelry
c. because, given De Beers’ control of the market, they are confident that the price of
diamonds will not plummet rapidly
d. because, given De Beers’ control of the market, they are confident that the price of
diamonds will rise rapidly
e. because that is what their customers expect them to do
Exhibit 19-9
If the country in Exhibit 19-9 is initially trading without restrictions at a world price of
$2.00 and an import quota of 50 units per month is enacted, the decrease in consumer
surplus can be represented by area
a. a
b. c + d
c. c + d + e
d. b + c + d + e
e. a + b + c + d + e
People make mistakes in allocating their time
a. because they always act irrationally
b. despite always having expectations fulfilled
c. only when leisure is a normal good
d. because acquiring information is costly
e. more often when the cost of making a mistake is high
An increase in the demand for peanut butter could be caused by a(n)
a. decrease in consumer income
b. increase in the supply of peanut butter
c. decrease in the price of bread
d. drought in Georgia that destroyed 30 percent of the peanut crop
e. decrease in the price of bologna
In terms of utility theory, “equilibrium” in the real world means that
a. households are consuming as much of every commodity as they would like
b. households have spent their incomes in such a way that their overall satisfaction is
maximized
c. households have spent their incomes in such a way that their marginal utility is
maximized
d. households have spent their incomes in such a way that their marginal utility is zero
for every product consumed
e. households have spent their incomes in such a way that their total utility is zero
Exhibit 10-3
The profit-maximizing price for the firm in Exhibit 10-3 is
a. $0
b. $27
c. $21
d. $15
e. impossible to determine because MR and MC are not known
Which of the following events would increase the supply of tomatoes?
a. the introduction of mechanized tomato pickers, which raises the cost of production
b. an increase in wages for the tomato pickers
c. a decrease in the cost of fertilizer for the tomato plants
d. unseasonably hot, dry weather in the tomato-growing regions of the nation
e. a decrease in the price of pasta products
Economists view pollution as an economic problem that arises because
a. private enterprise always minimizes the amount of pollution produced
b. profitable firms rarely pollute
c. as the economy grows, the level of pollution declines
d. firms that pollute do not pay the full social cost of producing their output
e. pollution costs are borne by the consumer
One result of voters’ rational ignorance is that
a. cyclical majorities are more common
b. vote trading is common
c. majority rules
d. special interests often dominate legislation
e. members of Congress go along with whatever their constituents want
Which of the following has been a result of welfare reform?
a. employment among mothers who head families substantially decreased
b. about two thirds of mothers who head families found work only eight years after
reform
c. the incomes of mothers who head families went down on average
d. welfare spending per recipient decreased significantly
e. most states combined tough new eligibility rules with an expanded menu of welfare
services
Exhibit 2-1 John and Harry’s Production Possibilities for Ironing Shirts and Typing
Papers
Exhibit 2-1 shows the production possibilities for ironing shirts and typing papers for
John and Harry. Each has 5 hours per week to spend on these tasks. Which of the
following statements is correct?
a. Harry has a comparative advantage in ironing.
b. Harry has a comparative advantage in typing.
c. Harry has an absolute advantage in typing.
d. Harry has an absolute advantage in ironing.
e. Neither can gain from specialization and exchange.
Managed float means
a. a fixed exchange rate system with regularly scheduled periodic devaluations
b. a freely floating exchange rate system
c. a hybrid of freely floating exchange rates with occasional intervention by central
banks
d. a fixed exchange rate system managed by the European Community
e. a flexible exchange rate system managed entirely by the IMF
Of the following, who would probably have the highest income?
a. a couple, both of whom have high school educations and work at WalMart
b. a husband who has a high school degree and a middle-management job and his wife,
who is a full-time mother
c. a couple, both of whom have high school educations; he is a high school teacher and
she is a librarian
d. a husband who has a college degree and is a high school teacher and his wife, who
has an MBA and works as a insurance company executive
e. a couple, both of whom have college degrees and are high school teachers
What would happen to the budget line if the price of compact disks decreased and
compact disks are measured on the vertical axis?
a. The budget line would shift to the left.
b. The budget line would rotate outward along the horizontal axis.
c. The budget line would rotate inward along the horizontal axis.
d. The budget line would rotate outward along the vertical axis.
e. The budget line would rotate inward along the vertical axis.
Along a linear demand curve,
a. both the slope and price elasticity are constant
b. the price elasticity is constant, but the slope varies
c. total revenues are constant
d. the slope is constant, but the price elasticity varies
e. total revenues are negative
An increase in the price of a resource will cause a rightward shift of its supply curve.
a. True
b. False
Pollution and other negative externalities arise because
a. there are no enforceable property rights to open-access resources
b. legislators cannot agree on what to do about them
c. they are the price consumers are willing to pay for production of goods and services
d. private property rights to pollute are controlled by businesses
e. science cannot decide how to control them
Social welfare is
a. a government program through which society takes care of low-income people
b. the overall well-being of people in the economy
c. measured by spending on party supplies, restaurant meals, and movie tickets
d. applies to sociology, not economics
e. All the answers are correct.
The marginal revenue product of labor equals
a. MP/wage
b. change in total revenue/change in units of labor
c. change in total revenue times the change in units of labor
d. P/MP
e. MP x wage
A demand curve that is unit elastic everywhere is
a. linear and slopes downward
b. linear and slopes upward
c. vertical
d. horizontal
e. nonlinear
Exhibit 1-14
Using Exhibit 1-14, calculate the slope of the curve where x equals 50.
a. 0
b. 1
c. infinite
d. -1
e. the slope cannot be determined because there is no tangent line
Households act as demanders when they demand
a. that corporate executives and government officials be held accountable for their
actions
b. dividends from the stocks they hold
c. interest and capital gains from the bonds they hold
d. goods and services from firms and the government
e. payment for the goods and services they sell to firms and governments
The limit on the amount of information a manager can comprehend about a firm’s
operation is known as
a. adverse selection
b. bounded rationality
c. diseconomies of scope
d. managerial incompetence
e. moral hazard
When economists refer to capital, they might mean
a. money
b. human skills used in production
c. stocks
d. bonds
e. bank loans
The normal life-cycle pattern of income reflects differences in earnings based on
a. race and education
b. gender and education
c. age and education
d. race
e. household size
Exhibit 13-6
In Exhibit 13-6, if the rental price of each sewing machine is $70, how many machines
should be used?
a. four
b. three
c. two
d. one
e. five
Collective bargaining is the process by which a labor union and a firm negotiate an
employment contract.
a. True
b. False
Farmer Fanny sells her crops in a perfectly competitive market. If she produces 500
bushels for total revenue of $2,500 and if harvesting the 501st bushel would raise her
total cost from $2,500 to $2,505, her
a. revenue will increase by $10 if she harvests the 501st bushel
b. revenue will fall by $5 if she harvests the 501st bushel
c. average fixed cost will rise if she harvests the 501st bushel
d. profit will fall by $10 if she harvests the 501st bushel
e. profit will remain unchanged if she harvests the 501st bushel
If a firm’s demand curve slopes downward, the firm’s
a. marginal revenue will rise as price is reduced
b. marginal revenue will generally be less than price
c. total revenue will decline continuously as price is reduced
d. marginal revenue will always be greater than its demand
e. average revenue will increase continuously as output increases
Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when
market demand suddenly increases. What would probably happen to a firm in this
industry in the long run?
a. It would experience no change for the original equilibrium
b. It would experience a higher equilibrium price
c. It would experience a lower equilibrium price
d. It would experience the same equilibrium price but would reduce its output
e. It would experience higher average total costs and would reduce its output
Exhibit 12-6
Consider Exhibit 12-6. If firms in this market are identical, how many firms are hiring
in this labor market?
a. 50
b. 60
c. 67
d. 72
e. 80