Examples of indirect taxes are
a. income taxes levied by some states.
b. sales taxes and property taxes.
c. poll taxes.
d. corporate profits taxes.
What is the present value of an infinite stream of annual payments of $10,000 per year
if the first payment is received one year from today? Assume the interest rate is 10
percent.
a. $100,000
b. $1,000,000
c. $10,000,000
d. $1,000,000,000
Total utility decreases when diminishing marginal utility is present.
a. True
b. False
The development of game theory was the work of
a. Joan Robinson and Edward Chamberlin.
b. John von Neumann and Oskar Morgenstern.
c. Wassily Leontief and Joseph Schumpeter.
d. John Maynard Keynes.
Regulations that strictly limit pollution
a. provide firms no incentives to reduce pollution once a standard is met.
b. provide incentives for firms to discover loopholes in the regulations.
c. tend to be economically inefficient ways to reduce pollution.
d. All of the above are true.
The price system automatically leads to an efficient allocation of inputs among the
different production processes.
a. True
b. False
One of the consequences of allowing wages to fall in the United States has been
growing wage inequality.
a. True
b. False
Figure 4-6
Grapes can be used for wine or for raisins. Which graph in Figure 4-6 best depicts the
effects on the U.S. raisin market of a decrease in purchases of domestic wines?
a. 1
b. 2
c. 3
d. 4
Securities markets perform a valuable economic function because they provide
a. an opportunity for investors to make money in a short time.
b. the principal indicator of the performance of the U.S. economy.
c. an easy way to transfer corporate securities, thereby reducing risk to investors.
d. assurance that stock purchasers can get back the purchase price of their stock.
The quantity demanded of an input normally rises as its price rises.
a. True
b. False
The “free rider” problem occurs when a good is
a. not available.
b. not excludable.
c. not depletable.
d. not sold in free markets.
With a negative income tax providing a minimum of $20,000 and a tax rate of 25
percent, what amount of supplement would the government pay to a household earning
$10,000?
a. $5,000
b. $10,000
c. $17,500
d. $20,000
Table 7-1
In Table 7-1, the marginal physical product of labor after the addition of the fourth
worker is
a. 8.
b. 7.
c. 10.
d. 5.
Which of the following is a fixed cost?
a. electricity
b. worker bonuses
c. mortgage on the building
d. steel to produce refrigerators
Gross domestic product is the money value of manufacturing production in a year.
a. True
b. False
In an attempt to boost enrollment, in January, 1996, a private college in Iowa offered
free tuition for graduating high school seniors from the county where it is located. For
students who accepted the offer, how did this offer affect the opportunity cost of
attending college?
a. The opportunity cost did not change, since lost earnings were still a factor.
b. The opportunity cost became zero for the typical student.
c. The opportunity cost was very low, because the only cost was for books and supplies.
d. The opportunity cost did not change, since tuition was not a factor in computing
opportunity cost.
e. The opportunity cost was lower than if tuition was charged, but there was still a cost.
Economists consider instances of increasing marginal utility to be
a. normal.
b. impossible.
c. unusual, as in the case of addictions.
d. irrational.
If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is
$2, then economic efficiency would require
a. increased production of flower pots.
b. increased production of coffee cups.
c. the price of coffee cups to exceed the price of flower pots.
d. the price of flower pots to exceed the price of coffee cups.
Which of the following mathematical expressions represents the equation of a straight
line with a slope of zero at all points on a graph with Y on the vertical axis and X on the
horizontal axis?
a. Y = a + X
b. X = bY
c. X = a
d. Y = a
The monopolistically competitive firm in short-run equilibrium
a. faces a downward-sloping demand curve.
b. has a marginal revenue curve which lies below its demand curve.
c. maximizes profit where MR = MC.
d. All of the above are correct.
Pure monopoly is defined as a
a. one-firm industry.
b. market structure in which there are many substitute products.
c. market structure maintained by entry of many rival firms.
d. market structure created by special government sanctions.
Loopholes have the effect of
a. encouraging particular patterns of behavior and favoring particular types of people.
b. eroding the progressivity of the income tax.
c. altering the pattern of economic incentives.
d. All of the above are correct.
The demand for Exxon gasoline is ____ the demand for all gasoline.
a. exactly as elastic as, and of a different slope from
b. more elastic than
c. less elastic than
d. exactly as elastic and of a different slope from
In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane.
DuPont claimed that the relevant market was flexible wrapping material, such as wax
paper and aluminum foil, rather than just cellophane. DuPont won the case. What type
of evidence constituted DuPont’s defense?
Compared to a negative income tax, the federal personal income tax is thought of as a
way to promote greater equality. Why?
Discuss the major programs to combat poverty and evaluate them on the basis of work
incentives.
Aunt Rose owned a dress shop on 81st Street and Broadway in Manhattan, selling
limited-edition dresses to wealthy clients. One day, her landlord tripled her rent. What
effect would this have on her dress price in the short run, assuming she is following the
rules of profit maximization?
What is a repeated game? Hoe does this helps the players in a game?
Would a profit-maximizing firm sell at a price where demand is inelastic? Explain.