When a decision is made based on a simple majority vote it is possible for the total
benefits to the community of this decision to be less than the total costs to the
community of this decision.
a. True
b. False
Exhibit 23-9
Suppose that the market starts out at
long-run competitive equilibrium with price equal to P1 and producing Q1output, and
then demand increases from D1 to D2. As a consequence, the typical profit-maximizing
firm will
a. increase quantity produced by (q2 – q1).
b. decrease quantity produced by (q2 – q1).
c. decrease quantity produced by (q1 – q3).
d. not change its output level because the demand curve it is facing did not change.
There is an average price for a used car that accounts for both good used cars and bad
used cars (“lemons”). At the current market price for used cars, the persons __________
likely to offer their used cars for sale are people who own __________.
a. most; “lemons”
b. least; good used cars
c. least; “lemons”
d. a and b
e. There is not enough information to answer the question.
Third-degree price discrimination is discrimination among
a. units.
b. quantities.
c. buyers.
d. prices.
For a perfectly competitive firm, MR = MC at 250 units of output. At 250 units, ATC is
greater than AVC. It necessarily follows that
a. the firm should shut down its operation.
b. the marginal cost curve must have an upward-sloping portion and a
downward-sloping portion.
c. the firm should continue to produce.
d. b and c
e. none of the above
What value goes in blank (C)?
a. 28
b. 16
c. 44
d. 50
e. There is not enough information to answer this question.
Exhibit 4-3
Which of the following is true?
a. If price P1 is set as a price ceiling it will have an effect on the market for good X.
b. If price P1 is set as a price floor it will have an effect on the market for good X.
c. Price P1 is the equilibrium price for good X.
d. If price P1 is set as a price floor, then it is the highest price that can legally be
charged in the market for good X.
Exhibit 31-5
If a positive externality exists, then the external benefits associated with the positive
externality equal the distance between points __________, and the market output is
__________.
a. A and C; Q2
b. B and D; Q1
c. C and A; Q1
d. B and C; Q1
e. b and c
International trade policies are largely advocated, argued, and lobbied for based more
on their distributional effects than on their aggregate or overall effects. What does this
imply?
a. Producers will lobby for protectionism even though they may know that their gains
from protectionism will be outweighed by the losses to consumers.
b. Consumers care more about how policies affect them than how policies affect them
and everyone else, too.
c. Tariffs are more effective than quotas.
d. Consumers’ surplus will rise (when it rises) more than producers’ surplus will fall
(when it falls).
e. none of the above
The need to make choices is most closely related to the economic concept of
a. opportunity cost.
b. efficiency.
c. inefficiency.
d. utility.
e. disutility.
Suppose the economy goes from a point on its production possibilities frontier (PPF) to
a point below that PPF. Assuming that the PPF has not shifted, this could be due to
a. a gain of resources.
b. a loss of resources.
c. technological improvement in the production of both goods.
d. a new law that interferes with economic efficiency.
The purpose of the ceteris paribus assumption is to allow economists to
a. determine the relationship among several variables.
b. determine the impact of several variables on another variable.
c. isolate the impact of one variable on several variables.
d. isolate the relationship between two variables.
Which of the following statements is false?
a. The quantity supplied of loanable funds and the interest rate are inversely related.
b. The supply curve of loanable funds is upward sloping.
c. One of the reasons the federal government demands loanable funds is that it needs to
finance budget deficits.
d. Savers are people who consume less than their current income.
The quantity demanded of good A changes from 100 to 111 when the price of good A
changes from $9 to $8. The cross elasticity of demand is
a. 1.20.
b. -1.13.
c. 2.20.
d. -0.89.
e. There is not enough information to answer the question.
Research by economists Autor, Dorn, and Hanson revealed that during the period 1990
to 2007, U.S. regions that faced more competition from Chinese imports had
_____________ unemployment rates and ______________ wages than U.S. regions
that faced less competition from Chinese imports.
a. lower; higher
b. higher; lower
c. lower; lower
d. higher; higher
In economics, the word “interest” refers to the
a. return earned by capital as an input in the production process.
b. return earned by land as an input in the production process.
c. price for credit or loanable funds.
d. price consumers pay to use the money supply.
e. a and c
When it comes to network goods, being one of the first companies in a market seems to
really pay off.
a. True
b. False