The price system rations goods among consumers in such a way that
a. all are treated equally.
b. all needs are satisfied.
c. the rich are favored.
d. important needs are satisfied first.
A production possibilities curve has a downward slope because
a. increased production of one good always reduces the additional profit of production.
b. decreased production of one good is associated with lower profit from that good.
c. economists have a negative view of life and human nature.
d. increased production of one good always reduces production of the other.
e. increased production of one good necessarily causes production of other goods to
increase.
An optimal decision is one that chooses
a. the most desirable alternative among the possibilities permitted by the resources
available.
b. the lowest cost method of meeting goals, without regard to quality or any other
feature.
c. among various possible goals and offends no one, so that all are equally happy.
d. among equally important goals, and thereby avoids the “indispensable necessity”
syndrome.
e. among possible goals in such a way that spends as little money as possible.
Figure 7-8
Of the graphs in Figure 7-8, which represents total cost?
a. 1
b. 2
c. 3
d. 4
The supply curve of books (which are produced using paper made from trees) will shift
to the left in response to
a. a decline in college tuition.
b. an increase in home building.
c. an increase in the supply of lumberjacks.
d. an end to government regulations that limit timber harvesting in national forests.
Powers of many regulatory agencies are designed to protect public health and safety.
a. True
b. False
Which of the following conditions distinguishes the monopolistic competitor from the
monopolist?
a. profit-maximizing rule
b. downward slope of demand curve
c. entry of rivals
d. short-run economic profits
If demand for a seller’s product is elastic, a price decrease will increase total revenue.
a. True
b. False
Because of scarcity, every economic decision involves
a. a trade-off.
b. a free good.
c. a trade-in.
d. an increasing cost.
e. a money payment.
Loopholes increase the efficiency of the tax system by making taxpayers better off.
a. True
b. False
If a government enacts a rent control to protect apartment tenants, the result is likely
going to be
a. an increase in rents with a surplus of apartments.
b. an increase in rents with a shortage of apartments.
c. a decrease in rents with a surplus of apartments.
d. a decrease in rents with a shortage of apartments.
When a business has been profitable and needs to invest, its preferred method of
financing will likely be
a. plowback.
b. stock issue.
c. bond sales.
d. equal issues of stocks and bonds.
Which of the following could be written into an insurance contract in order to reduce
the problem of moral hazard?
a. co-payments for repair services
b. deductibles for repair services
c. limitations on insurance coverage
d. All of the above are correct.
Governments of market-oriented economies never tamper with the price mechanism.
a. True
b. False
The benefits principle is often used to justify
a. the progressive income tax.
b. a flat income tax.
c. a regressive excise tax.
d. earmarking the proceeds from taxes for specific public services.
A firm that charges a very low price would be practicing predatory pricing if
a. the price allowed only a small profit.
b. the price would only be profitable if it succeeded in driving a rival out of the market.
c. the price allowed profits that were positive but below those earned by other firms.
d. it only offered the low price to its rivals’ customers.
The marginal revenue product of an hour of labor used in steel production is equal to
a. its marginal physical product times the hourly wage rate.
b. its marginal physical product times the price of steel.
c. the hourly wage rate.
d. its marginal physical product divided by the price of steel.
If the income effect of a change in the wage dominates the substitution effect, then
workers will want to work more when the wage increases.
a. True
b. False
Economic rent is the minimum payment necessary to induce any of the factor to be
supplied.
a. True
b. False