An example of a(n) ________ comparative advantage is that some U.S. consumers
prefer German beer over American beer because German beer has a reputation for
tasting better.
A) unwarranted
B) acquired
C) natural
D) subsidized
Table 8.3
Refer to Table 8.3. The marginal cost of the fourth unit is ________, and the average
total cost of four units is ________.
A) $5; $15
B) $10; $22.50
C) $15; $17.50
D) indeterminate from the given information
The restaurant industry is an example of a(n) ________ industry.
A) perfectly competitive
B) monopolistic
C) monopolistically competitive
D) oligopolistic
Demand for one item goes down when the price of another item goes down. These
items must be
A) substitutes.
B) complements.
C) normal goods.
D) inferior goods.
Why do firms engage in the activity of production?
A) to help society advance technologically
B) to participate in the circular flow
C) to acquire profits
D) to develop a supply schedule
An example of ________ is an apprenticeship program.
A) tangible capital
B) social capital
C) infrastructure
D) intangible capital
Liability rules are laws that require party A to compensate party B for damages that
party B imposed on party A.
Income or wealth are often used to measure individual well-being because
A) they are assumed to be related to utility and are easily measured while the best
measurement, utility, is not.
B) they are the best measures of well-being since the more you have of either of them
the better-off you are.
C) as income and wealth increase, individuals are able to consume more and thus must
be better-off.
D) both can be redistributed to improve equity.
Related to the Economics in Practice on page 241: In the United States, more mature
companies often have a larger percentage of stock held by ________ than do newer
companies, and newer companies often have a larger percentage of stock held by
________ than do more mature companies.
A) institutions; insiders
B) foreign governments; institutions
C) insiders; foreign governments
D) the U.S. government; foreign governments
[(P – ATC)q] represents
A) economic profit.
B) total revenue.
C) total cost.
D) average fixed cost.
Economic profit is
A) TR –TC.
B) TR –TFC.
C) TR –TVC.
D) TVC –TFC.
Economic income is the sum of consumption and
A) net worth.
B) the change in net worth.
C) wealth.
D) transfer payments.
An electronics manufacturer can produce either MP3 players or cell phones. As the
result of a decrease in the price of cell phones, the firm produces more MP3 players and
fewer cell phones. An economist would explain this by saying
A) the supply of cell phones increased and the supply of MP3 players decreased.
B) there has been an increase in the quantity supplied of cell phones and a decrease in
the quantity supplied of MP3 players.
C) there has been a decrease in the quantity supplied of cell phones and an increase in
the supply of MP3 players.
D) the supply of cell phones increased and the quantity supplied of MP3 players
decreased.
For an economy to produce at a point beyond its current ppf, the economy must
A) waste less.
B) be more efficient.
C) reduce inputs.
D) increase its resource base.
In the short run
A) a fixed factor of production does NOT impose limits on existing firms.
B) all firms must bear some costs regardless of their output.
C) new firms can enter an industry.
D) existing firms can exit an industry.
Which of the following is NOT listed in the book as a reason to study economics?
A) to learn a way of thinking
B) to understand society
C) to be an informed citizen
D) to learn how to make lots of money
A few firms each large enough to influence market price characterizes the ________
market structure.
A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly
Table 16.2
Refer to Table 16.2. This glass-recycling firm is perfectly competitive and is not forced
to take damage costs into account. If the market price of glass is $50 a ton, the firm will
produce
A) 0 tons of glass.
B) 2 tons of glass.
C) 3 tons of glass.
D) 4 tons of glass.
Table 16.2
Refer to Table 16.2. This glass-recycling firm is perfectly competitive and is NOT
forced to take damage costs into account. If the market price of glass is $25 a ton and
the firm behaves as a profit maximizer, then total damage will be ________.
A) $20
B) $40
C) $110
D) $500
Related to the Economics in Practice on page 722: In the Kerala region of India,
fishermen used cell phones to help connect buyers and sellers, reducing waste. All of
the following describe ways in which technology is likely to improve information flow
and increase economic efficiency EXCEPT:
A) Fax technology makes it possible to transmit signed contracts in seconds, allowing
the parties to the contract to begin performing their contract duties more quickly.
B) High-speed Internet connections allow engineers in developing countries to
collaborate with firms all around the world.
C) E-mail now makes criminals who commit certain kinds of fraud very difficult to
identify and arrest.
D) Video conferencing decreases the need for expensive business travel.
________ is (are) most likely a variable cost for a firm.
A) The interest payments made on loans
B) The franchiser’s fee that a restaurant must pay to the national restaurant chain
C) The monthly rent on office space that it leased for a year
D) The payroll taxes that are paid on employee wages
Any firm’s ________ equals P × q.
A) total cost
B) total revenue
C) marginal revenue
D) marginal cost
If a firm’s total costs are $100 when 10 units of output are produced and $103 when 11
units of output are produced, the marginal cost of the 11th unit is
A) $1.
B) $3.
C) $5.
D) $9.36.
Mary Kay Ash was one of the first individuals who sold cosmetics directly to customers
via independent sales representatives. The company founded by Mary Kay is now one
of the largest and most successful cosmetics companies in the world. Mary Kay Ash
would be classified as a(n)
A) entrepreneur.
B) opportunist.
C) monopolist.
D) socialist.
Related to the Economics in Practice on page 318: Producers of Honest Tea add less
sugar to their tea than the amount that would maximize consumers’ total utility from
sugar because
A) the financial cost of the additional sugar is less than the additional revenue that the
firm would earn.
B) producers are attempting to differentiate their product from the very sweet Snapple.
C) the marginal utility to the consumer from adding more sugar is very low (near zero)
while the marginal health cost (added calories) is quite high.
D) producers are attempting to market their product to diabetics.
________ is financed out of general revenues.
A) Medicaid
B) The Supplemental Security Income program
C) The Food Stamp program
D) All of the above are correct.
The slope of a horizontal line is
A) negative.
B) zero.
C) continually changing.
D) infinite.
Below are cost curves for Dom’s Barber Shop, a monopolistically competitive firm.
Figure 15.1
Refer to Figure 15.1. If Dom’s Barber Shop is maximizing profit, its total revenue
equals
A) $200.
B) $320.
C) $350.
D) $360.
An economist wants to understand the relationship between minimum wages and the
level of teenage unemployment. The economist collects data on the values of the
minimum wage and the levels of teenage unemployment over time. The economist
concludes that a 1% increase in minimum wage causes a 0.2% increase in teenage
unemployment. From this information he concludes that the minimum wage is harmful
to teenagers and should be reduced or eliminated to increase employment among
teenagers.
The statement that an increase in the minimum wage causes an increase in teenage
unemployment is an example of
A) a fallacy.
B) an economic theory.
C) normative economics.
D) deductive reasoning.
Table 8.1
Refer to Table 8.1. Assume that the relevant time period is the short run. Assuming the
price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average
variable cost of producing two units of output is
A) $20.
B) $40.
C) $90.
D) $100.
According to comparative advantage, trade between two countries
A) maximizes the amount of inputs that are used in the production of all products.
B) guarantees that consumption levels will be equal in the two countries.
C) will benefit all the industries in each of the countries.
D) allows each of the trading countries to allocate its resources most efficiently.
The idea that a dollar in the hand of a rich person is worth ________ a dollar in the
hand of a poor person is a consequence of utilitarian justice.
A) less than
B) more than
C) the same as
D) nothing compared to
Investors put up $104,000 to construct a building and purchase all equipment for a new
restaurant. The investors expect to earn a minimum return of 10 percent on their
investment. The restaurant is open 52 weeks per year and serves 900 meals per week.
The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the
fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable
costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc.
The restaurant charges $6 on average per meal.
In the short run, if the restaurant decides to stay open, it will make weekly operating
profits of
A) -$2,800.
B) $0.
C) $2,800.
D) $5,400.
Figure 16.6
Refer to Figure 16.6. In the top portion of the figure are the demand curves of two
people in this society for a public good. Which of the panels represents the market
demand curve for the public good?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
Comment on the following statement: “If the provision of public goods was left to
private firms, the outcome would be more efficient than what occurs when the
government provides them.”
Describe what took place during the Industrial Revolution.
What is the factor substitution effect?
Comment on the following statement: “If a firm shuts down in the short run, it will earn
zero economic profit.”
Explain the long-adjustment process that take place in a monopolistically competitive
industry that is earning pure economic profits.
Suppose in a purely competitive market that American firms consider labor costs to be
mostly variable while Japanese firms consider labor costs to be mostly fixed. What
implication would this have for the viability of firms in each country if they compete
with one another in the short run? What about the long run?
The lumber market is currently in equilibrium at a price of $2 per foot. A new
technology is developed that reduces waste and increases efficiency in the production of
lumber. Show graphically the effect of this new technology in the lumber market. What
will happen to the equilibrium price and quantity sold?
What do most empirical studies of labor supply in the United States conclude
concerning the elasticity of labor supply and what implication does this have with
respect to who bears the burden of the payroll tax?
Critically evaluate the following statement. “Only poor nations face scarcity. Rich
nations have everything they need and have therefore conquered scarcity.”
What is a household’s choice set or opportunity set?
Explain how income and substitution effects alter the saving behavior of households.
Assume that for whatever reason there is a manufacturing firm exhibits a constant
marginal product of labor over a certain range of production. Armed with only this
information what would you be able to say about the average product and total product
of labor curves of this firm.
What is utilitarian justice?
Suppose that a firm is currently earning revenues that are smaller than its total costs.
The firm’s managers are trying to decide whether or not the firm should shut down in
the short run. On what information should the manager’s decision be based?
Compare and contrast the concepts of income and wealth. Are these measured as astock
or a flow? Explain.