If the Gini coefficient for Cartland is 1, it means that income distribution is perfectly
equal in this society.
Rent control is an example of a price ceiling.
Entrepreneurs who earn arbitrage profit are able to do so by extracting the total
consumer surplus from buyers.
If a monopolist’s price is $50 at the output where marginal revenue equals marginal cost
and average total cost is $43, then the incremental profit from the last unit sold is $7.
Even if the population declines, scarcity will still exist.
Political stability is not a prerequisite to economic growth.
When the Federal Reserve increases the money supply, people spend more because
interest rates fall.
To increase gas mileage, automobile manufacturers make cars small and light. Large
cars absorb more of the impact of an accident than small cars but yield lower gas
mileage. These facts suggest that a negative relationship exists between safety and gas
mileage.
An economy that grows too slowly fails to raise living standards.
An increase in the price of inputs will cause the supply curve for a product to shift to
the right.
Economic profit is the difference between a firm’s revenue and its opportunity costs.
Which of the following is true about the occurrence of the twin deficits?
A) They always occur together.
B) They only occur when exchange rates are fixed.
C) They did not occur after 1990 in the United States.
D) They occur consistently in all the economies of the world except the United States.
Arnold Harberger was the first economist to estimate the loss of economic efficiency
due to market power. Since Harberger’s findings were published, other researchers have
studied this same issue. How do the results of these researchers compare to Harberger’s
results?
A) The other researchers reached conclusions similar to Harberger’s; namely, the loss of
economic efficiency due to market power is about 10 percent of the value of production
in the United States.
B) The other researchers reached conclusions different from Harberger’s; namely, they
found that the loss of economic efficiency due to market power is only about 1 percent
of the value of production in the United States, much less than Harberger’s estimate.
C) The other researchers reached conclusions different from Harberger’s; namely, the
loss of economic efficiency due to market power is about 10 percent of the value of
production in the United States, significantly greater than Harberger’s estimate.
D) The other researchers reached conclusions similar to Harberger’s; namely, the loss of
economic efficiency due to market power is about 1 percent of the value of production
in the United States.
The demand by all the consumers of a given good or service is the ________ for the
good or service.
A) market demand
B) quantity demanded
C) law of demand
D) scheduled demand
Which term refers to a legally established minimum price that firms may charge?
A) a price ceiling
B) a subsidy
C) a price floor
D) a tariff
Growth in labor productivity in health care has been ________ labor productivity in the
economy as a whole.
A) approximately equal to
B) slightly faster than
C) almost twice as fast as
D) less than half as fast as
If the economy is currently in equilibrium at a level of GDP that is above potential
GDP, which of the following would move the economy back to potential GDP?
A) a decrease in wealth
B) a decrease in interest rates
C) an increase in business confidence
D) a decrease in the value of the dollar relative to other currencies
The typical labor supply curve is upward-sloping but it is possible for the curve to be
backward bending – negatively sloped – at very high wage levels. Which of the
following would cause a backward bending supply curve?
A) This would occur when the income effect from an increase in the wage becomes
larger than the substitution effect.
B) This would occur when the substitution effect from an increase in the wage becomes
larger than the income effect.
C) This would occur if leisure is an inferior good.
D) This would occur when a large number of workers choose leisure rather than
employment at low wages; only a very large increase in the wage will lead these
workers to prefer employment to leisure.
If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of
$60, zero units are sold. Based on this information, the demand for his cell-phone
covers is
A) elastic or perfectly inelastic.
B) elastic or perfectly elastic.
C) unit-elastic.
D) perfectly inelastic.
The sales tax
A) is consistent with the benefits-received principle because low-income individuals
spend less on goods and services than do high-income people.
B) is not consistent with the ability-to-pay principle because low-income individuals
tend to spend a larger fraction of their income than do high-income individuals.
C) is not consistent with the ability-to-pay principle because low-income individuals
tend to purchase a smaller bundle of goods and services compared to high-income
individuals.
D) is not consistent with the benefits-received principle because low-income individuals
spend less on goods and services than do high-income individuals, yet pay the same
sales tax rate.
Figure 4-6
Figure 4-6 shows the demand and supply curves for the almond market. The
government believes that the equilibrium price is too low and tries to help almond
growers by setting a price floor at Pf. What area represents consumer surplus after the
imposition of the price floor?
A) A + B + E
B) A + B
C) A + B + E + F
D) A
Figure 3-2
An increase in the expected future price of the product would be represented by a
movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
Which of the following statements concerning the federal corporate income tax is true?
A) It is an efficient tax because it imposes a small excess burden relative to the tax
revenue it raises.
B) The incidence of the corporate income tax can be determined by using demand and
supply analysis.
C) Determining the incidence of the corporate income tax is complicated because it is
not certain how corporations respond to the tax.
D) The corporate income tax is an example of the benefits-received principle.
DeShawn’s Detailing is a service that details cars at the customers’ homes or places of
work. DeShawn’s cost for a basic detailing package is $40, and he charges $75 for this
service. For a total price of $90, DeShawn will also detail the car’s engine, a service that
adds an additional $20 to the total cost of the package. Should DeShawn continue to
offer the engine detailing service?
A) Yes, he still makes a profit by selling the engine detailing service with the basic
detailing package.
B) Yes, but only if he raises the price of the basic detailing package.
C) No, his marginal benefit is less than his marginal cost.
D) More information is needed for DeShawn to make this decision.
Doctors and lawyers in every state need a license to practice. This is an example of
A) consumer protection laws.
B) consumer advocacy.
C) occupational licensing.
D) ownership of a key input.
If it is difficult for a firm to attribute the output it produces to a particular worker, then
A) its employees are likely to form a union.
B) a commission system of compensation will be preferable to a salary system.
C) a salary compensation system will be preferable to a commission system.
D) a piece-rate system of compensation will be preferable to a salary system.
What is the difference between a price ceiling and a price floor? Compared to the
competitive equilibrium price, where must price ceilings and price floors be set to have
an effect on the market.
Figure 5-4 Figure 5-4 represents the supply and
demand for medical services with and without a third-party payer.
Answer the following questions:
1. What would be the equilibrium price and quantity if consumers had to pay the full
price of medical services?
2. With insurance acting as a third-party payer, what price will consumers pay for
medical service?
3. With insurance acting as a third-party payer, what price will doctors receive for
medical service?
4. With insurance acting as a third-party payer, what will be the equilibrium quantity of
medical services?
5. With insurance acting as a third-party payer, what will be the value of the deadweight
loss?
Given Table 23-6 below, fill in the values for saving. Assume taxes = $800.Table 23-6
Explain how “menu costs” affect the slope of the short-run aggregate supply curve.
Table 23-2
Using the table above, compute aggregate expenditure and identify the macroeconomic
equilibrium.
Suppose the current price of copper is $3 per pound and the quantity supplied is 200
pounds per day. If the price of copper falls to $2.50 per pound, the quantity supplied
drops to 180 pounds per day. Use the midpoint formula to calculate the price elasticity
of supply for copper.