The sales revenue a seller receives from the sale of an additional unit of goods is called
the marginal benefit.
A positive technological change will cause the supply of a good to increase.
The U.S. government would never approve a proposed merger between two firms that
could significantly increase the newly merged firm’s market power even if the
efficiency gains from the newly merged firm could make consumers better off.
Total utility is constant along a given indifference curve.
The slope of an isocost line determines the marginal rate of substitution.
If firms are protected by substantial barriers to entry, short-run profits can turn into
long-run profits.
A tax is efficient if it imposes a large excess burden relative to the tax revenue it raises.
A successful strategy of price discrimination requires that a firm be a price taker.
The law of one price holds exactly only if there are transactions costs associated with
buying a product in one location and selling it in another location.
In the 1930s and 1940s, the Technicolor company was able to leverage its bargaining
power over the movie industry because Technicolor was the sole producer of cameras
and films needed to produce color films.
In the circular flow model, households supply resources such as labor services in the
factor market.
Results of the ultimatum game indicate that most people value fairness enough that they
will refuse to participate in a transaction they consider unfair, even if they are worse off
financially as a result.
The actual division of a tax between buyers and sellers in a market is the excess burden
of the tax.
If average product is decreasing, then marginal product must be negative.
The substitution effect of a price increase causes a decrease in the quantity of an
inferior good demanded.
Behavioral economics is the study of situations in which people make rational choices.
In a decreasing-cost industry, the entry of new firms lowers average cost at each level of
output.
When a business is set up as a sole proprietorship, the owner of the business faces
limited liability.
In a free market there are virtually no restrictions, or at best few restrictions on how
factors of production can be employed.
The Clayton Act of 1936 outlawed price discrimination that reduced competition.
If the income effect of a wage increase equals the substitution effect, the labor supply
curve is horizontal at the equilibrium wage.
One reason college students do not study enough to get high grades is that they are
unrealistic about their future behavior.
In the long-run equilibrium, a monopolistically competitive firm earning normal profit
produces the allocatively efficient output level.
From 1970 to 2010, the poverty rate in East Asia rose slightly but the level of poverty in
sub-Saharan Africa fell dramatically.
If the demand for a product is elastic, the quantity demanded changes by a larger
percentage than the percentage change in price.
A public good is a good that is both rival and excludable.
For a natural monopoly, the marginal cost of producing an additional unit of its product
is relatively small.
If a country is producing efficiently and is on the production possibilities frontier, the
only way to produce more of one good is to produce less of the other.
Selling a product at a price below its cost is known as dumping.
Suppose the extra cost to a pet store of advertising one additional day each week in the
local newspaper is $450. Then, the pet store should advertize that one additional day
each week if doing so brings in additional revenue of $450 or more each week.
The payment received by suppliers of entrepreneurial skills is called wages.
The marginal product of labor curve is the demand curve for labor.
Protectionism
A) is the use of cheap labor to protect firms from paying high wages.
B) is the use of trade barriers to protect domestic firms from foreign competition.
C) refers to reductions in tariffs and other barriers that protect consumers from paying
high prices.
D) refers to the use of copyright and trademark laws to protect inventors and artists
from losing the rights to their creative efforts.
You are given the following market data for Venus automobiles in Saturnia.
Demand: P = 200 – 0.25Q
Supply: P = 130 + 0.10Q
where P = Price and Q = Quantity.
a. Calculate the equilibrium price and quantity.
b. Calculate the consumer surplus in this market.
c. Calculate the producer surplus in this market.
All else equal, if job turnover has people leaving jobs and finding new jobs in the same
industry, this will
A) increase the demand for labor and the supply of labor.
B) increase the demand for labor and decrease the supply of labor.
C) decrease the supply of labor, but not change the demand for labor.
D) not change demand or supply in the labor market.
If a monopolistically competitive firm lowers its price and, as a result, its total revenue
decreases then
A) the output effect of the price change was less than the price effect.
B) the output effect of the price change was greater than the price effect.
C) the firm’s demand curve must have decreased.
D) the substitution effect of the price change was greater than the income effect.
Figure 2-7
Apple recently announced that the company is exploring the electric vehicle market,
and is looking to produce vehicles as early as 2020. Assume Apple chooses to produce
both traditional electric-engine vehicles and self-driving electric-engine vehicles. Figure
2-7 shows changes to its production possibilities frontier in response to new
developments and different strategic production decisions.
Refer to Figure 2-7. Assume that in response to changing consumer demands, Apple
cuts back on the production of traditional vehicles and increases its production of
self-driving vehicles. This strategy is best represented by the
A) movement from E to F in Graph A.
B) movement from J to G in Graph B.
C) movement from L to K in Graph C.
D) movement from H to J in Graph B.
Figure 12-16
Refer to Figure 12-16. Which panel best represents the perfectly competitive organic
produce market’s transition to the long run when some firms in the market are earning
economic profits?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
Which of the following could explain why the demand for table salt is inelastic?
A) Salt is a luxury good.
B) Salt is a rare commodity.
C) Households devote a very small portion of their income to salt purchases.
D) Salt is a luxury for high-income consumers but a necessity for low-income
consumers.
Technological advancements have led to lower prices and an increase in the sale of
digital cameras. How does this affect the digital photo printing paper market?
A) The demand curve for digital photo printing paper shifts to the right.
B) The demand curve for digital photo printing paper shifts to the left.
C) The supply curve for digital photo printing paper shifts to the right.
D) The supply curve for digital photo printing paper shifts to the left.
The median voter model implies that
A) many people will be satisfied with the amount of spending on government funded
projects.
B) many people will be dissatisfied with the amount of spending on government funded
projects.
C) people in the political middle will be dissatisfied with the amount of spending on
government funded projects.
D) spending on government funded projects reflects the preferences of only those far
away from the median.
Consumers who will pay high prices to be among the first to own certain new products
are called
A) savvy consumers.
B) naive consumers.
C) gullible.
D) early adopters.
In order to avoid the imposition of other types of trade barriers, foreign producers will
sometimes agree to voluntary export restraints. With voluntary export restraints, foreign
producers
A) agree to meet specific quality standards required by the importing country.
B) limit their exports to a country.
C) pay a tax on all products they export.
D) must agree to import an equal quantity of products that they export.
Table 14-8
Two rival oligopolists in the athletic supplements industry, the Power Fuel Company
and the Brawny Juice Company, have to decide on their pricing strategy. Each can
choose either a high price or a low price. Table 14-8 shows the payoff matrix with the
profits that each firm can expect to earn depending on the pricing strategy it adopts.
Refer to Table 14-8. If the firms cooperate, what prices will they select?
A) Both firms will select a low price.
B) Brawny Juice will select a high price; Power Fuel a low price.
C) Both firms will select a high price.
D) Brawny Juice will select a low price; Power Fuel a high price.
Figure 2-1
Refer to Figure 2-1. Point B is
A) technically efficient.
B) unattainable with current resources.
C) inefficient in that not all resources are being used.
D) the equilibrium output combination.
Calling long distance is often more expensive on weekdays between 8 am and 5 pm
than in the evening hours. Why is this the case?
A) Telephone companies hope to discourage customers from calling long distance
during the day to keep their labor costs down.
B) The cost of making long-distance connections is higher during the day than in the
evenings.
C) Businesses who must call suppliers or customers during business hours have few
alternatives and therefore have an inelastic demand during the workday compared to
after-work hours.
D) Increasingly, businesses who must call suppliers or customers during business hours
resort to the internet, thereby reducing demand for long-distance calls. To make up for
this fall in demand, telephone companies charge higher rates.
Which of the following best explains why airlines often cut their ticket prices at the
last-minute in order to fill the remaining empty seats on their flights?
A) Fixed costs in the airline industry are very large, but the marginal cost of flying one
more passenger is very low.
B) Airlines receive a subsidy from the government for each flight that is fully booked
and departs on time.
C) The Federal Aviation Administration ranks each airline based on the percentage of
flights that are fully booked. These rankings affect the decisions of firms to use a
particular airline to fly their employees to business meetings.
D) Cutting prices makes the airlines more popular with their customers, who may fly
with the same airline in the future as the result of buying low-price tickets.
Which of the following is a flow in the circular flow model?
A) the flow of goods and services from households to firms
B) the flow of profit and the flow of revenue
C) the flow of income earned by firms and the flow of expenditures earned by
households
D) the flow of revenue received by firms and the flow of payments to resource owners
An increase in the price of pineapples will result in
A) a smaller quantity of pineapples supplied.
B) a larger quantity of pineapples supplied.
C) a decrease in the demand for pineapples.
D) an increase in the supply of pineapples.
Figure 18-6
Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
Refer to Figure 18-6. Which country has the more unequal distribution of income?
A) Islandia
B) Syldavia
C) They may have the same absolute income distribution although their relative income
distribution is different.
D) There is insufficient information to answer the question.
If another worker adds 9 units of output to a group of workers who had an average
product of 7 units, then the average product of labor
A) will remain the same.
B) will increase.
C) will decrease.
D) and what will happen to it cannot be determined.
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 4
burritos?
A) $1.00
B) $4.00
C) $7.00
D) $10.00
Adhira buys chocolates and almonds. She has 3 bars of chocolates and 4 bags of
almonds. The marginal utility of the third chocolate bar is 18 units of utility and the
marginal utility from the fourth bag of almonds is also 18. Is Adhira maximizing her
utility?
A) Yes, the marginal utility from the last unit of each good is equal.
B) No, she must buy 1 more chocolate bar to equate her quantities of the two goods.
C) No, she must cut back to 3 bags of almonds to equate her quantities of the two
goods.
D) No, without information on her income and the prices of the two goods, we cannot
answer the question.
If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so
in the
A) output market.
B) product market.
C) factor market.
D) dairy products market.
Consider a situation in which a utility company emits high levels of sulfur dioxide and
the company is not liable for the damages its pollution causes. According to the Coase
theorem, government action is ________ to achieve an ________ amount of pollution.
A) necessary; equitable
B) necessary; efficient
C) not necessary; equitable
D) not necessary; efficient
Table 12-2
Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume
that Margie operates in a perfectly competitive market.
Refer to Table 12-2. What is Margie’s total revenue if she sells 250 pounds of apples?
A) $250
B) $500
C) $750
D) There is not enough information in the table to determine Margie’s total revenue.
Compared to a perfectly competitive firm, the demand curve facing a monopolistically
competitive firm is
A) more elastic because there are many close substitutes for the product of a
monopolistically competitive firm.
B) less elastic because monopolistically competitive firms produce similar, but not
identical, products.
C) just as elastic because there are many sellers in both markets.
D) more elastic because in the long run, the demand curve is tangent to the firm’s
average total cost curve.
Traditionally, economists have considered culture, customs, and religion as
A) very important influences on the choices consumers make.
B) relatively unimportant factors in explaining the choices consumers make.
C) important influences in explaining consumer choices in command economies but
less important in market economies.
D) subject to normative economic analysis rather than positive economic analysis.
The order of the letters along the rows of computer keyboards could be changed to
allow users to type faster, but this would inconvenience the vast majority of people who
learned to type with the current keyboard layout. The costs of switching to a new layout
make this change unlikely. This is an example of
A) path dependency.
B) how social influences overwhelm the substitution effect of a price change.
C) how the elasticity of demand for typewriters has been affected by externalities.
D) how consumers sometimes do not behave rationally.
All Gini coefficients must lie between 0 and 1. The lower the value
A) the more unequal the income distribution.
B) the closer the income distribution is to being equal.
C) the greater the degree of poverty.
D) the lower the degree of poverty according to the federal government’s definition of
poverty.
An advantage of Microsoft Windows is its compatibility with the widest range of
hardware and software. The dominance of Windows is self-reinforcing: hardware and
software manufacturers ensure that their products are compatible with Windows in
order to have access to the large number of Windows users. Which principle best
describes this scenario?
A) endowment effects
B) endorsement effects
C) economies of scale
D) network externalities
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6. Prior to trade, what was the opportunity cost to produce 1 hat in
Denmark?
A) 1/6 of a clock
B) 2/3 of a clock
C) 5 clocks
D) 6 clocks
Figure 11-2
Refer to Figure 11-2. Short run output is maximized at
A) L1.
B) L2.
C) L3.
D) insufficient information to determine
Figure 11-9
Refer to Figure 11-9 above to solve the following problems.
a. Calculate the fixed cost of production.
b. Calculate the average total cost of production when the firm produces 20 units of
output.
c. Calculate the average variable cost of production when the firm produces 20 units of
output.
d. Calculate the average fixed cost of production when the firm produces 20 units of
output.
e. Calculate the average fixed cost of production when the firm produces 15 units of
output.
f. If the firm increases output from 15 to 20 units, what is the marginal cost of output?
Firms disclose financial statements in ________ and in ________.
A) periodic filings to the federal government; annual reports to shareholders
B) daily filings to the federal government; daily reports to shareholders
C) monthly reports to shareholders; 5-year balance statements to the board of directors
D) weekly filings with the SEC; monthly reports to the Fed
Under what circumstances will the law of one price hold, and when might it not hold?
What is a firm’s balance sheet?
What are the most important differences between perfectly competitive markets and
monopolistically competitive markets?
What is autarky?
What is the ceteris paribus condition?
What is the difference between the poverty line and the poverty rate?
What is marginal benefit? Which curve is also referred to as a marginal benefit curve?
State the law of diminishing returns. How do diminishing returns differ from
diseconomies of scale? Be sure to define diseconomies of scale in your answer.
Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million
gallons a day were sold. In October 2004, the price averaged $2.15 a gallon and 14
million gallons were sold. If the demand for gasoline did not shift between these two
months, use the midpoint formula to calculate the price elasticity of demand. Indicate
whether demand was elastic or inelastic.
What are the advantages of setting up a corporation as opposed to a proprietorship or
partnership?
What is meant by the term opportunity cost?
Suppose the price elasticity of demand for methamphetamine is -0.35. If
decriminalization caused the price of methamphetamine to fall by 75 percent, what will
be the percentage increase in the quantity of methamphetamine demanded? If the price
elasticity is -3.5, what will be the percentage increase in quantity demanded?
The Equal Pay Act of 1963 requires that men and women be given equal pay for equal
work in the same establishment. Most people agree that gender discrimination in the
workplace is unfair, but many economists have criticized advocates of comparable
worth. Is paying the same wages for jobs that have comparable worth mandated by the
Equal Pay Act? Why don’t most economists support proposals to force employers to pay
their male and female employees based on comparable worth rules?