Capitalism is an economic system in which there is public ownership of the means of
production and resource allocation is determined through markets.
a. True
b. False
Unrestrained monopolies are criticized because they restrict output and reduce
innovation.
a. True
b. False
There are generally, in most areas, a large number of qualified physicians whose
services are highly personalized. In addition to price, factors such as age, sex, location,
and personality influence the choice of physician. Thus, the market is best described as
a. perfectly competitive.
b. a differentiated oligopoly.
c. a monopoly.
d. monopolistically competitive.
The host at a party offers Justin a sixth beer. Justin says, “No thanks, man. The marginal
utility of that fifth beer was, like, 20 cents, but the marginal utility of the sixth would be
minus 10 cents.” From his comments, we deduce that Justin
a. is an alcoholic.
b. may think that a sixth beer would make him sick.
c. is irrational.
d. wrongly estimates the marginal utility of the fifth beer.
____ occur when an X percent increase in input use raises output by more than X
percent, so that the more the firm produces, the lower its per-unit costs become.
a. Economies of scope
b. Scale economies
c. Product differentiation
d. Perfect competition
In 2012, the poverty line for a family of four was approximately
a. $10,075
b. $13,100
c. $15,700
d. $23,250
Marginal cost is the
a. change in total cost resulting from the purchase of one more unit of the variable
input.
b. change in total cost resulting from the production of one more unit of output.
c. difference between total fixed cost and total variable cost.
d. difference between total cost and total expenditure.
Markets can efficiently handle irreversible decisions without involvement of
government.
a. True
b. False
Overall, professional securities analysts have a 75% success rate in predicting winning
stocks.
a. True
b. False
Nonconsumption spending accounts for roughly what percent of total output of goods
and services?
a. 20%
b. 30%
c. 40%
d. 60%
In a long-run equilibrium in a perfectly competitive market, firms are selling at a price
equal to marginal cost.
a. True
b. False
The entry of new firms into a monopolistically competitive industry will cause the
long-run equilibrium price to rise.
a. True
b. False
The market demand curve is the horizontal summation of all individual demand curves.
a. True
b. False
Economics examines the options open to households, business firms, governments, and
entire societies by the limited resources at their command.
a. True
b. False
The United States produces ____ of what it consumes, and consumes ____ of what it
produces.
a. little, little
b. little, most
c. most, little
d. most, most
How will an increase in price tend to affect demand?
a. Demand will increase.
b. Demand will decrease.
c. Demand will not change.
d. Uncertain.
In a famous series of commercials, the International Ladies’ Garment Workers Union
(ILGWU) urged buyers to “look for the union label” and to avoid buying clothes not
made by ILGWU members. Through the commercials, the ILGWU tried to attain its
goals by
a. restricting the number of ILGWU members.
b. featherbedding.
c. raising the marginal revenue products of ILGWU members.
d. creating lower prices for goods made by ILGWU members.
Americans generally pay
a. a lower percentage of their incomes in taxes than citizens of other industrialized
countries.
b. a lower percentage of their incomes in taxes than citizens of other industrialized
countries, with the exceptions of Sweden and the Netherlands.
c. about the same percentage of their incomes in taxes as citizens of other industrialized
countries.
d. a higher percentage of their incomes in taxes than citizens of other industrialized
countries.
The nation listed below whose economy currently comes closest to a free market is
a. North Korea.
b. Germany.
c. People’s Republic of China.
d. Cuba.
Regulating firms so that they always receive a guaranteed profit rate will lead to
greatest efficiency.
a. True
b. False
When large oligopolistic firms negotiate with the unions of their employees, the
resulting bargaining process closely resembles
a. perfect competition.
b. a dual labor market.
c. monopolistic competition.
d. bilateral monopoly.
Long-run equilibrium under monopolistic competition requires that
a. the demand curve intersect the average cost curve.
b. the demand curve be tangent to the average cost curve.
c. price be equal to marginal cost.
d. quantity produced be at the point where average cost is at a minimum.
The typical average cost curve
a. continually declines as output increases.
b. is horizontal.
c. continually increases as output increases.
d. first declines to a minimum and then increases as output increases.
What is the distinction between innovation and invention?
Explain how stock options can ensure compatibility between the interest of
stockholders and managers.
Explain why the average cost curve for the long run differs from that for the short run.
Briefly review the history of antitrust legislation in the United States.
The United States can produce 1,000 shoes if it specializes in shoe production.
Alternatively, it can produce 500 shirts. Taiwan can produce 500 shoes or 200 shirts.
Explain which country will specialize in shoe production and which in shirt production.
What are the possible terms of trade?
The essential logic behind international trade is not different from that underlying trade
among different states. Why, then, do we study international trade as a special subject?
What rule(s) should a firm follow in deciding optimum output for profit maximization?
Why might well-educated economists disagree on appropriate public policy in some
situations?