For a rational consumer, the consumer’s surplus will never be a negative number.
a. True
b. False
Table 22-4
Table 22-4 presents the demand and supply schedules for television sets in Japan and
the United States. If there is no trade between these countries, what are the equilibrium
price and quantity in the United States?
a. P = $100, Q = 100
b. P = $200, Q = 85
c. P = $300, Q = 70
d. P = $500, Q = 50
The slope of a typical production possibilities frontier reflects the fact that
a. some systems of market organization are more efficient than others.
b. the invisible hand always functions smoothly in a market system without government
intervention.
c. when resources are allocated efficiently, it’s impossible to produce more of anything
without producing less of something else.
d. production is only possible when resources are allocated efficiently.
Price discrimination only occurs under monopoly.
a. True
b. False
Figure 10-7
In Figure 10-7, through which point must a horizontal demand curve pass to yield a
long-run equilibrium?
a. A
b. B
c. C
d. All of the above is correct.
If P = MC for all goods in a free-market economy, then
a. the desire for utility maximization will lead consumers to buy the amount of each
good at which MU = MC.
b. the desire for profit maximization will lead consumers to buy the amount of each
good at which MU = MC.
c. the desire for utility maximization will lead consumers to buy only those goods that
have low opportunity costs.
d. the desire for profit maximization will lead all firms to stop producing in the long run
(though possibly not in the short run).
The portion of income which is earned in the form of wages for labor is about
a. 15%
b. 35%
c. 51%
d. 60%
Total profit is represented by the vertical distance between a total revenue curve and a
total cost curve.
a. True
b. False
Lower inflation rates are usually correlated with lower unemployment rates.
a. True
b. False
Which of the following statements is true of entrepreneurs?
a. They have a talent for spotting new profit-making opportunities.
b. They are an indispensable ingredient to the U.S.’s unprecedented growth performance
c. They are an indispensable ingredient to the U.S.’s success over the centuries.
d. All of the above are true.
In sophisticated analysis of rent differences
a. quality of land is assumed away.
b. quality of land is recognized and considered.
c. rates of return are assumed away.
d. returns on land and capital are assumed to be similar.
The kinked demand curve model explains pricing in monopoly markets.
a. True
b. False
Which of the following events would increase the four-firm concentration ratio in a
milk industry with six firms?
a. The two largest milk producers merge.
b. The largest milk producer buys an ice cream-making plant.
c. The largest milk producer lures customers away from the second-largest producer.
d. The four largest milk producers collusively fix prices.
For most industries, average costs decrease indefinitely as output expands.
a. True
b. False
In the short run the firm has no more than one fixed input.
a. True
b. False
The income effect of a wage increase is expected to increase
a. supply of labor.
b. supply of goods and services.
c. demand for leisure.
d. demand for labor.
Gross Domestic Product in 2013 was almost five times larger than it was in 1960 but it
is important to note that
a. none of the growth represented more output.
b. measurement of output omitted any effect of inflation.
c. the population grew substantially over the same time period.
d. graphs of output were unable to display such growth.
In a market system, prices are used to coordinate economic activity.
a. True
b. False
Marginal profit is the profit
a. earned by a firm that is about to go out of business.
b. calculated directly from the total cost curve.
c. that is added by a one-unit increase in total output.
d. earned for each dollar of cost increase.
In cases of natural monopoly, it is best to have only one firm producing all of the output
in a market.
a. True
b. False
Plowback refers to the profits management decides to keep and reinvest in the firm’s
operations.
a. True
b. False
Pleasure boaters enjoy the use of waterways, but sometimes run into problems and need
rescue. Coast Guard boats, supported by tax revenue, are often used for rescue. Is it
likely that there will be an efficient amount of boating and rescuing?
What are the factors that contribute to productivity growth in the market economy and
which of them is considered most important?
Discuss the advantages of the Herfindahl-Hirschman Index compared with the four-firm
concentration ratio.
A country can gain by importing a good from abroad even if that good can be produced
more efficiently at home. Is this statement true?
Using marginal analysis, explain why many restaurants and coffee shops offer low-cost
refills on beverages (for example, a shop may charge $1,50 for a cup of coffee and only
$.50 for a refill).
Explain how usury laws distort the market for funds. What is the most likely result if a
usury law is passed and enforced?