Figure 7-7
In Figure 7-7 at 100 units, AVC equals
a. 8.
b. 800.
c. 100.
d. 1,000.
The price of bonds is tied to the interest rate; when one goes up, the other must fall.
a. True
b. False
The marginal cost of an airline ticket is the total cost of flying the plane divided by the
number of passengers.
a. True
b. False
One advantage about an emissions permit system is that
a. it creates a “license to pollute,” sure to be popular with environmentalists.
b. it reduces uncertainty about the quantity of pollution that will be emitted.
c. it is a direct control system and avoids the inefficiencies of a market.
d. permits can be handed out on the basis of need to protect firms from high costs.
Stock markets deal
a. almost exclusively in newly issued stocks.
b. in previously issued stocks.
c. in both newly issued and previously issued stocks, but they do not deal in bonds.
d. in large amounts of both newly issued and previously issued stocks and bonds.
If a country produces a commodity in the range of decreasing returns to scale, and the
country begins to export more in a pure free trade system, the domestic price of the
commodity will
a. fall.
b. rise.
c. exceed the price in foreign countries.
d. be below the price in foreign countries.
e. One cannot predict the impact on the price of the commodity.
The substitution effect makes workers want to work less when the wage increases.
a. True
b. False
If in some production range average cost is rising, the firm is experiencing
a. increasing returns to scale.
b. decreasing returns to scale.
c. constant returns to scale.
d. increasing costs per unit of output.
Microsoft is accused of which anti-competitive practice?
a. interlocking directorates
b. illegal “bundling” of products
c. exclusive contracts
d. predatory pricing
The ability to shift a tax burden depends on the relative elasticities of demand and
supply for the taxed commodity.
a. True
b. False
A subsidy to firms intended to reduce pollution in an industry would
a. shift the LRAC curve upward.
b. have the same impact on the firm as a tax.
c. likely drive some existing firms from the industry.
d. likely have the paradoxical effect of increasing pollution in the industry in the long
run.
Economies of scale are also called increasing returns to scale.
a. True
b. False
As price increases, additional suppliers are willing to produce a commodity.
a. True
b. False
The relative concept of poverty is based on how far a family falls behind the
a. average family income.
b. top 20 percent of families.
c. minimum in wages.
d. any of the above.
Total cost equals average cost multiplied by the quantity of output.
a. True
b. False
If a firm’s marginal profit is negative, it should reduce its output level.
a. True
b. False
Which of the following would be classified as an innovation?
a. Edwin H. Land perfects the single-step photographic process in 1947.
b. Polaroid markets the single-step film in 1948.
c. Thomas Alva Edison perfects the incandescent lamp with carbon filament in 1879
d. In 1803, Robert Fulton constructs his first small steamboat in Paris.
In a perfectly contestable market in the long run, each firm
a. produces at the minimum point on its long-run average total cost curve.
b. earns a profit below its opportunity cost of capital.
c. avoids making capital expenditures.
d. All of the above are correct.
Affirmative action programs,
a. according to critics, are clearly quota systems that lead to reverse discrimination.
b. according to supporters, make efforts to find qualified minorities and women and hire
them.
c. according to critics, clearly lead to the hiring of unqualified people and thus reduce
efficiency.
d. All of the above are true.
The only circumstance under which a factor will earn no rent is when the factor’s supply
curve is
a. vertical.
b. upward sloping.
c. perfectly horizontal.
d. kinked.
Too much of society’s scarce resources are used to produce goods in monopoly markets.
a. True
b. False
If the price of hamburger rises, we would expect the demand for steak to shift to the
right.
a. True
b. False
Firms in a perfectly contestable market will be forced to operate as efficiently as
possible and to charge prices as low as long-run financial survival permits. Why?
A firm’s minimum AC is $10, its minimum AVC $7. Show this firm’s short-run supply
curve, explaining how you obtained it.
What are the major goals that unions may pursue in labor negotiations? Are these ever
in conflict with one another?
Is peak pricing economically efficient? Explain. Give an example to illustrate your
answer.
If a firm that emits a form of pollution is also a monopolist, is the firm more likely to be
allocatively efficient? Explain.
Explain why a monopolist does not have a supply curve.
Economists say that voluntary exchange makes both parties better off. What is the
explanation that they offer to back up this conclusion?