Figure 20-4
In Figure 20-4, which panel depicts a union suffering unemployment during a recession
rather than allowing the wage to fall?
a. 1
b. 2
c. 3
d. 4
In the typical AC curve, the downward-sloping part is attributable to
a. spreading fixed costs over larger outputs and increasing returns to the variable inputs.
b. declining administrative costs as output increases.
c. falling fixed costs.
d. rising total product.
Sometimes, the taxes with the smallest excess burden are:
a. progressive
b. regressive
c. proportional
d. digressive
When pollution problems arise from a sudden crisis, pollution taxes are a useful form of
control.
a. True
b. False
The slope of the budget line is the amount of one commodity that a consumer must give
up in order to obtain an additional unit of the other commodity.
a. True
b. False
The existence of a universal law of scarcity creates pressures on societies to
a. use their resources according to government plans.
b. economize in the use of their resources.
c. allocate their resources equitably.
d. exploit their resources.
Marginal analysis is useful in economics, but not in other areas of life.
a. True
b. False
Figure 4-21
A surplus will tend to occur at which price in Figure 4-21?
a. P1
b. P2
c. P3
Economic discrimination occurs when two equal factors of production are paid
differently.
a. True
b. False
Is it possible to express an economic model in words without diagrams?
a. No, models can only be stated in diagrams.
b. No, the very definition of model requires mathematical form.
c. Yes, some of the simplest models are verbal statements.
d. Yes, although the best models always use diagrams.
e. Uncertain, economic theory has not answered this question yet.
Regulating an industry to remove all economic profit
a. removes all incentive for efficiency and responsiveness to consumer demand.
b. removes distortions caused by cross subsidies.
c. removes allocative inefficiency.
d. increases incentives to be productively efficient.
The New York Stock Exchange handles only about 10 percent of all stock market
transactions in the United States.
a. True
b. False
An efficient allocation of resources requires that a product’s price equal its average cost.
a. True
b. False
Is the call for protection on the basis of national defense valid?
a. No, because protection has no place in national defense.
b. No, protection is always improper.
c. Uncertain, economic theory has no answer to this question.
d. Yes, although it can be overstated and abused.
The “War on Poverty” was declared by President Ronald Reagan in 198
a. True
b. False
Two goods with a low cross elasticity of demand are competing in the same market.
a. True
b. False
Resolving Adam Smith’s diamond-water puzzle involves
a. realizing that price is not directly related to total utility.
b. knowing that at optimal purchase, price will tend to equal marginal utility.
c. knowing that, as increasing quantities of a good are consumed, marginal utility
diminishes and, conversely, consuming a small quantity of a good produces high
marginal utility.
d. All of the above are correct.