Consumer income changes can shift market demand.
a. True
b. False
Payroll taxes are used to collect revenue for the Social Security program.
a. True
b. False
Which of the following is an advantage to the pollution-rights approach to
environmental quality?
a. Polluters are compelled to clean up completely.
b. Polluters have appropriate incentives to clean up.
c. This is a method of direct government regulation.
d. Compliance with legal guidelines is discretionary.
Figure 14-2
In Figure 14-2, which movement would represent an improvement for all individuals?
a. A to B
b. C to AC
c. D to B
d. A to D
The concept of economies of scope describes the savings acquired from simultaneous
production of different products.
a. True
b. False
The price of an airline ticket rises as the amount of time between purchase and flight
departure gets smaller. The airlines base the policy on the assumption that
a. consumers are not aware of airline prices.
b. consumer demand is unrelated to prices.
c. consumer demand becomes more elastic as departure time approaches.
d. consumer demand becomes less elastic as departure time approaches.
Forecasts of an inevitable exhaustion of essential natural resources are ‘simply beside
the point” because higher prices
a. reduce quantity demanded.
b. stimulate supply.
c. stimulate alternative technology.
d. All of the above are true.
How does imperfect information affect market decisions?
a. It doesn’t, because information is generally excellent.
b. It leads to inefficient outcomes in which expected benefits and actual benefits
diverge.
c. It leads to wasteful attempts to improve information.
d. It leads to exploitation of sellers by buyers.
Economists may disagree about how to solve an economic problem because they
a. use different models to analyze the problem and its solutions.
b. have different political and moral beliefs.
c. disagree about the facts of the situation.
d. All of the above are correct.
According to the principle of marginal productivity, the quantity of an input demanded
depends on the
a. price of the input.
b. price of outputs in which the input is used.
c. technology of production.
d. All of the above are correct.
An airline is considering adding a flight from Chicago to Sioux Falls. Total cost of the
flight is $5,500 Variable cost is $2,000. Revenue from the flight is expected to be
$3,000 Should the flight be added?
a. No, the revenue ($3,000) is below the cost ($5,500)
b. No, the addition to profit is very small and not worth the effort.
c. Yes, profit increases by $1,000 ($3,000 − $2,000)
d. Yes, profit increases by $3,000
Mortgage loans made to borrowers with a more limited ability to repay are known as
a. subprime mortgages.
b. credit default swaps.
c. leveraged securities.
d. mortgage backed securities.
Scarcity is illustrated graphically by a production possibilities frontier.
a. True
b. False
Accounting profit is usually smaller than economic profit.
a. True
b. False
Of all the payments made to factors of production in the United States in 2013, ____
received the lowest share.
a. land rents
b. labor
c. interest payments
d. corporate profits
A tax must be progressive if an individual with a higher income pays more dollars in
taxes than an individual with a lower income.
a. True
b. False
The United States is one of the most marketized economies in the world.
a. True
b. False
The market demand curve
a. and the individual demand curve are synonymous.
b. is calculated by multiplying the number of consumers by the individual demand
curve.
c. shows how the total quantity demanded of some good changes as price changes,
other things held constant.
d. can be calculated even if individual demand curves are unknown.
A market will experience a ____ when the price is above equilibrium and a ____ when
the price is below equilibrium.
a. shortage, shortage
b. surplus, surplus
c. shortage, surplus
d. surplus, shortage
Wages in most other countries have increased as a percentage of U.S. wages in the past
33 years.
a. True
b. False
Economic profit of a decision in question equals
a. accounting profit of the decision in question + its opportunity cost.
b. accounting profit of the decision in question − accounting profit of the best
available alternative.
c. accounting profit of the decision in question + its opportunity cost + overheads.
d. its opportunity cost + accounting profit of the best available alternative.
Which of the following situations is a clear application of the benefits principle of
taxation?
a. wealthier people are taxed more heavily
b. heavier vehicles are charged higher tolls on turnpikes
c. state government providing a free education to any child in the state
d. sales of measles vaccine exempt from sales tax
A price above equilibrium always yields a surplus.
a. True
b. False
A decrease in the price of VCRs will increase demand for video cassettes.
a. True
b. False
The current price of concert t-shirts is $20 each, and the company has been selling 400
per week. If price elasticity is 2.5 and the price changes to $21, how many t-shirts will
be sold per week?
Explain why firms that enjoy economies of scale or scope are candidates for regulation.
How do rising prices slow resource depletion?
Using the general concept of elasticity, would you expect the elasticity of demand for
advertising to be positive or negative? Explain.
How is a production indifference map helpful?