The factor that leads to underpricing and overuse of an economic resource is
a. human greed and selfishness.
b. capital markets.
c. the lack of an enforceable property right.
d. the lack of understanding of pollution and its effects.
Total utility
a. diminishes as the quantity consumed of a good increases.
b. increases as long as more goods are acquired.
c. increases as long as marginal utility increases.
d. increases as long as marginal utility is positive.
e. diminishes as consumption of some good rises.
In 1972, a very controversial study asserted that income differences among individuals
did not depend on genetic differences in reasoning ability, or differences between
schools, or family background. Moreover, the effects of level of schooling are much
less than previously understood. After controlling for all of these background variables,
much of the variation in earnings appeared to be random. From this analysis, one might
reach the very controversial conclusion that earnings depended to a very great extent on
a. human capital.
b. ability.
c. schooling.
d. luck.
In North Carolina, a car must pass an emissions test before it can be registered. The
emissions test costs $20 per car. This system is an example of
a. direct controls on pollution.
b. a per-unit emissions tax.
c. a “license to pollute.”
d. subsidies for nonpollution.
Who tends to benefit from the sugar price supports?
a. users of sugar in other products
b. individual users of sugar
c. producers of other agricultural products
d. producers of sugar
e. All of the above are correct.
Policy-oriented economists seek to develop theories to
a. explain how things work so policies can be formulated.
b. describe what happened in a particular time period in history.
c. describe current economic events.
d. find correlations between events.
e. change people’s values and ethics.
One of the reasons why firms pollute air and water is that
a. air and water are often not priced.
b. managers desire to pollute.
c. air and water have no value to society.
d. managers are profit maximizers.
The United States has had a long history of work time lost due to worker strikes. This
trend has
a. increased over time.
b. decreased over time.
c. stayed relatively constant during the past century.
d. been less of a problem compared to other countries such as Japan.
A monopolist is a price maker who will lose some business if the price is increased.
a. True
b. False
An inferior good is one
a. produced by American industries.
b. whose quantity demanded falls when the purchaser’s income rises.
c. ordinarily bought by college students from college-town merchants.
d. suitable for a garage sale.
In both the 1970s and the 1990s, extreme economic events caused unemployment to
move in the same direction as inflation.
a. True
b. False
Suppose that the United States can make 15 cars or 20 bottles of wine with one year’s
worth of labor. France can make 10 cars or 18 bottles of wine with one year’s worth of
labor. From these numbers, we can conclude that
a. the United States has a comparative advantage in the production of cars.
b. France has a comparative advantage in the production of wine.
c. the United States has an absolute advantage in the production of cars.
d. All of the above are correct.
The federal government receives most of its revenue from personal income taxes and
payroll taxes.
a. True
b. False
The short run is that period during which there are no fixed commitments.
a. True
b. False
How does rent control tend to cause persistent imbalances in the market for housing?
a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the
shortage.
b. Quantity demanded exceeds quantity supplied but price cannot fall to remove the
surplus.
c. Quantity supplied exceeds quantity demanded but price cannot rise to remove the
shortage.
d. Quantity supplied exceeds quantity demanded but price cannot fall to remove the
surplus.
Efficient production can be carried out anywhere on or below the production
possibilities frontier.
a. True
b. False
Explain what is meant when it is said that the demand for labor is a derived demand.
The job market for which group always seems to have higher unemployment than the
labor force as a whole? Why?
Why is comparative advantage rather than absolute advantage the basis for trade?
Draw a graph using production indifference curves and budget lines showing a firm
initially minimizing cost with its inputs of A and B. Then illustrate a new optimal
combination of inputs when the prices of the inputs change.
What are the three noteworthy labor market trends that Americans have experienced for
about two decades?
Explain the expression “time is more valuable than money.” Explain in words and use a
diagram to illustrate the implications of this for a person’s labor supply curve.
The table below gives data on output for a firm in the short run. The firm is able to hire
labor and its TPP is given. Compute the APP, MPP, and MRP for labor if the price of
the good is fixed at $12 per unit.
Explain the excess burden of a tax on luxury yachts.
What quantity of output and price do they try to set, when a group of oligopoly firms
form a cartel? Will there be any changes in the price and quantity supplied if the cartel
gets broken down?
Explain what protections and rules are in place for entrepreneurs, which encourages
them to innovate.