Devaluation of a domestic currency
a. is also called revaluation
b. refers to an increase in a floating exchange rate
c. refers to a decrease in a floating exchange rate
d. refers to an increase in a fixed exchange rate
e. refers to a decrease in a fixed exchange rate
Exhibit 7-2
Given the information in Exhibit 7-2, at what point do negative marginal returns set in?
a. before the first unit of labor
b. between the first and second units of labor
c. between the second and third units of labor
d. between the third and fourth units of labor
e. between the fourth and fifth units of labor
In 2009, the official poverty level for a family of four was approximately
a. $1,000
b. $5,193
c. $22,000
d. $24,000
e. $33,062
Ronald Coase’s study, “The Nature of the Firm,” argued that firms are formed to take
advantage of situations in which hierarchies are more efficient than markets.
a. True
b. False
Sally is allocating her budget between two goods, A and B. If Sally has used up the
budget on a combination of A and B for which MUA/PA exceeds MUB/PB, she can
increase total utility by buying
a. more A and less B
b. more B and less A
c. more A without changing her consumption of B
d. less B without changing her consumption of A
e. more B and more A
Which of the following is not true of the terms of trade?
a. They are determined by supply and demand factors.
b. They lie somewhere between the opportunity costs of the trading partners.
c. GATT begins negotiations on the terms of trade.
d. They depend on negotiations between trade partners.
e. They often favor one partner more than the other.
One group of people uses New York City subways only during rush hour to travel to
and from work. Another group uses them only in midday for leisure activity. If New
York City wants to increase transit fares with the smallest possible reduction in revenue,
for which group should it increase the fare?
a. The rush-hour group because its demand for subway service is more elastic than that
of the midday group.
b. The rush-hour group because its demand for subway service is less elastic than that
of the midday group.
c. The midday group because its demand for subway service is more elastic than that of
the rush-hour group.
d. The midday group because its demand for subway service is less elastic than that of
the rush-hour group.
e. It doesn’t matter because both groups have the same elasticity of demand.
If producers cannot afford the fees for pollution rights,
a. they will pollute
b. they will buy pollution rights
c. they will sell pollution rights
d. they will have to find a cheaper way to deal with their pollution
e. they will not be able to use their pollution rights
Some demand curves have constant elasticity everywhere.
a. True
b. False
Which of the following is most likely to happen to open-access wildlife resources?
a. They will be used efficiently.
b. They will not be used at all.
c. It will be unprofitable to use them.
d. They will be used but will generate no profit.
e. They will become extinct.
Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and
labor. The firm can operate its copy machine for 2,000 hours if it hires no labor. What is
the cost of operating a copy machine for one hour?
a. 12.5 cents
b. $1.25
c. $12
d. $20
e. It is impossible to tell from the information given.
The qualifying income level for Medicaid
a. is $10,000
b. is $14,000
c. is set separately by each state
d. is set yearly by the Bureau of the Census
e. varies inversely with the number of children in the family
Exhibit 2-11
Refer to exhibit 2-11. The United States has an absolute advantage in bothe the
production of T-shirts and rice.
a. True
b. False
Exhibit 10-2
Consider Exhibit 10-2. If the firm is charging price P* for output q*, then in order to
minimize loss in the short run, the firm should
a. shut down because price is greater than average variable cost
b. shut down because price is greater than marginal cost
c. shut down because price is less than average variable cost
d. continue to produce because price is greater than average variable cost
e. continue to produce because price is greater than marginal cost
Economics is best defined as the study of how
a. individuals decide to use scarce resources in an attempt to satisfy their unlimited
wants
b. to make money
c. the government should deal with unemployment and inflation
d. to eliminate the problem of scarce resources
e. to run a business
In a coordination game, a Nash equilibrium occurs when
a. each player ignores the strategy of the other player
b. each player chooses no strategy, but maintains the status quo
c. each player chooses the same strategy
d. one player can improve the outcome by changing strategy
e. None of the answers is correct.
Exhibit 5-24
Refer to Exhibit 5-24. The demand curve that best illustrates how consumers will
respond to a change in price over a very long time period is:
a. curve D(1)
b. curve D(2)
c. curve D(4)
d. curve D(3)
e. either curve D(1) or D(4)
One common assumption in game theory is that firms
a. try to avoid the worst outcome
b. try to achieve the best outcome
c. minimize losses
d. always cooperate
e. always compete
Which of the following provide the best evidence of specialization?
a. a firm that produces a line of related products, such as eight kinds of breakfast cereal
b. an architect who is willing to practice in only one geographic area
c. a physician that practices in a specialty area such as cardiology or orthopedic surgery
d. a family that eats at Wendy’s every Thursday night
e. a retailer that sells goods but provides no services
Monopolistically competitive firms do not achieve productive efficiency because
a. entry of firms raises production costs in the long run
b. barriers to entry allow profit to be earned in the long run
c. price is greater than marginal cost at the profit maximizing output level
d. profit is maximized at a quantity where average total cost is not minimized
e. there is no threat of entry in the long run
Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and
labor. If the price of labor is $4 per hour and the firm can afford to operate its copy
machine for 2,000 hours if no labor is hired, how many additional hours of labor could
the firm hire if it gave up one hour of copy machine time?
a. 5/8
b. 2
c. 1/5
d. 5
e. 1/4
Which of the following is nottrue with regard to economic profit?
a. economic profit equals total revenue minus total cost
b. economic profit excludes implicit cost
c. economic profit is any profit greater than a normal profit
d. firms attempt to maximize economic profit
e. long-run economic profit is always zero in perfect competition
The expression “There’s no such thing as a free lunch” means that
a. services may be free, but goods are never free
b. even if it has a price of zero, a good or service has a cost
c. charitable organizations should not serve free lunches to the poor
d. poor people are really the ones who pay for their allegedly free lunches
e. someone has to pay the market price for a good or service
An economic model is useful if it
a. includes every detail of reality
b. involves no unproven assumptions
c. is expressed in equations
d. makes accurate predictions
e. is simple enough to be understood by a child
Which of the following is most likely to be a normal good?
a. trips to the laundromat
b. macaroni-and-cheese dinners
c. tickets to major league baseball games
d. bus rides
e. used paperback books
Which of the following is not correct regarding dumping?
a. In the country where products are dumped, consumer surplus grows as a result of the
dumping.
b. Dumping involves the selling of a product by foreign producers at a price lower than
that in their own countries.
c. Critics of dumping recommend applying a tariff as the correct antidumping measure.
d. A major difficulty with dumping by firms in other countries is that it drives up prices
to the domestic consumer.
e. Predatory dumping is often aimed at driving domestic producers out of business.
If a monopolist engages in perfect price discrimination,
a. the marginal revenue curve becomes steeper
b. the demand curve also becomes the marginal revenue curve
c. the demand curve is steeper than the marginal revenue curve
d. the demand curve is not as steep as the marginal revenue curve
e. there is no way to define its marginal revenue
If a monopolistically competitive firm can earn a profit, it will adjust production until
a. MR > AVC
b. MR = ATC
c. MC > MR
d. MR = AR
e. MR = MC
The availability of substitutes makes the demand for a good less elastic.
a. True
b. False
Which of the following would be the best example of a sole proprietorship?
a. The legal office of Alias, Smith and Jones
b. A local mom and pop restaurant
c. Microsoft
d. A local hospital
e. A State University
Which of the following would not shift the demand curve for pork?
a. an increase in the price of beef
b. an increase in the price of pork
c. an increase in the incomes of pork consumers
d. a widespread advertising campaign for pork
e. a finding that consumption of beef increases the risk of heart attack
Which of the following is not an example of derived demand?
a. As more high school graduates go on to college, more professors are hired.
b. As consumers buy more computers, they demand more powerful computers as they
become available.
c. As people let their hair grow longer, fewer people become barbers.
d. As people buy more tennis shoes instead of sandals, they buy more shoe laces.
e. Increased demand for overnight delivery speeds up orders for new delivery trucks.
Copious Corp. is owned by 2 million stockholders who elect a board of directors that
selects a management team responsible for hiring workers to serve customers by selling
and repairing computer mice. Which of the following statements is true?
a. In the principal-agent relationship between workers and customers, the customers are
the agents.
b. In the principal-agent relationship between workers and managers, the managers are
the agents.
c. In the principal-agent relationship between the stockholders and the board of
directors, the stockholders are the agents.
d. In the principal-agent relationship between the stockholders and the customers, the
stockholders are the agents.
e. In the principal-agent relationship between management and the board of directors,
the managers are the agents.
Exhibit 4-4
Refer to Exhibit 4-4. A shift from demand curve D to D’ illustrates a(n)
a. decrease in demand
b. decrease in quantity demanded
c. increase in quantity demanded
d. increase in demand
e. increase in supply