Marginal physical product measures the increase in total output that results from a
one-unit increase in an input.
a. True
b. False
Official data may overstate the extent of poverty because
a. poverty is a relative as opposed to an absolute concept.
b. it does not add “in-kind” transfers to the incomes of the poor.
c. it overstates the taxes paid by the poor.
d. it overestimates the amount the poor earn in the “underground economy.”
The producer’s surplus is equal to the difference between how much the seller can
charge for a product and how much the consumer is willing to purchase it for.
a. True
b. False
If the cross elasticity of demand for potato chips and pretzels equals 1,5,
a. potato chips and pretzels must both be luxury goods.
b. either potato chips or pretzels must be a luxury good, and both may be luxury goods.
c. potato chips and pretzels must be substitutes.
d. potato chips and pretzels must be complements.
If the opportunity cost of capital is below the rate of return to capital in the perfectly
competitive beauty salon industry,
a. resources will flow into the industry.
b. beauty salon owners must be earning negative economic profit.
c. the beauty salon industry cannot be in long-run equilibrium.
d. beauty salon owners must be earning negative marginal revenue at their current
levels of output.
When a motorist speeds down the road at well above the posted limit, economists
believe that the principle of ____ may be directing his actions.
a. rent seeking
b. defective telescopic faculty
c. moral hazard
d. resource misallocation
Opportunity costs exist for
a. households but not businesses or governments.
b. businesses but not households or governments.
c. businesses and households but not governments.
d. households, businesses, and governments.
Compared to perfect competition, monopoly in the long run
a. restricts output.
b. charges a higher price.
c. produces at less than minimum average cost.
d. All of the above are correct.
Suppose that the supply of insulin is perfectly elastic and the demand for insulin
perfectly inelastic. Then the result of an excise tax would be
a. a significant increase in government revenue and a significant decrease in the
quantity consumed.
b. a significant decrease in the quantity consumed with no change in government
revenue.
c. a significant increase in government revenue and no change in the quantity
consumed.
d. no increase in government revenue and no change in the quantity consumed.
The supply curve shows
a. the same basic information as the demand curve.
b. who will have an opportunity to produce or purchase an item.
c. the quantity produced as a function of the price.
d. plots of what quantities have been sold over the past few weeks or months.
Oligopolists
a. are price takers.
b. rarely advertise.
c. must take rivals’ reactions into account.
d. offer homogeneous products.
____ has(have) traditionally been the chief instrument of environmental policy in the
United States.
a. Taxes on pollution
b. Voluntary compliance
c. Tradable emissions permits
d. Direct controls
Efficiency is defined as minimizing waste.
a. True
b. False
Figure 11-6
At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a
profit equal to
a. zero.
b. (P2 − P3)Q.
c. P > Q.
d. (P5 − P6 )Q.
Inaccurate prediction generally invalidates the use of theory in economics.
a. True
b. False
If the supply of a good is perfectly inelastic, then suppliers will bear the full burden of
an excise tax
a. no matter how elastic the demand for the good is.
b. only if demand is perfectly elastic.
c. only if demand is perfectly inelastic.
d. only if the government forbids them to raise the price of the good.
The corporate income tax is
a. an indirect tax.
b. a regressive tax.
c. the second largest source of revenue for the federal government.
d. a direct tax.
Regarding U.S. health care costs, it is correct to say that:
a. Americans pay more for health care than people in other developed countries.
b. U.S. health care costs are growing faster than the growth in other countries.
c. The level of health care costs are the source of fiscal pain that societies around the
globe are experiencing.
d. All of these statements are true.
An open economy is one in which exports and imports constitute a large share of GDP.
a. True
b. False
In a perfectly competitive industry, influence over price is exerted by
a. individual sellers.
b. individual buyers.
c. the largest firms.
d. the forces of supply and demand.
Which of the following best reflects the ability-to-pay philosophy of taxation?
a. an excise tax on coffee
b. an excise tax on gasoline
c. a progressive income tax
d. a tax on residential property
A transfer payment is a sum of money
a. spent by government for new goods and services.
b. shifted between members of a household.
c. given by government without a good or service in exchange.
d. moved between companies for goods and services.
e. required to pay taxes.