“Protection” is designed to help
a. firms whose relative inefficiency does not permit successful competition with
imports.
b. workers who have very high productivity, and cannot survive against low-paid
foreign workers.
c. government that needs revenue from tariffs and quotas to cover government
spending.
d. firms that are highly efficient, and cannot survive against low-price foreign imports.
The average tax rate is
a. the ratio of additional taxes to an additional dollar of income.
b. the ratio of taxes to income.
c. the ratio of taxes to GDP.
d. the ratio of income to direct taxes.
Briefly and concisely define the following terms:
a. price discrimination
b. tying contracts
c. concentration ratio
d. market power
The excess capacity theorem states that society would clearly benefit from a reduction
in the number of monopolistic competitors.
a. True
b. False
Figure 4-21
A shortage will tend to occur at which price in Figure 4-21?
a. P1
b. P2
c. P3
The free-market system coordinates output decisions by pushing
a. up price when there is a shortage.
b. down price when quantity demanded exceeds quantity supplied.
c. up price when there is a surplus.
d. up price when quantity supplied exceeds quantity demanded.
The more money firms spend on R&D the faster the economy is expected to grow.
a. True
b. False
In economic theorizing, common sense will always lead to the correct answer.
a. True
b. False
Two policies to combat discrimination are affirmative action and right-to-work laws.
a. True
b. False
Which term refers to the share of an activity’s marginal cost that is paid for by the
persons who carry out the activity?
a. Beneficial cost
b. Incidental cost
c. Marginal private cost
d. Marginal social cost
A hostile takeover is one opposed by the firm’s existing management.
a. True
b. False
Setting price equal to marginal cost in a natural monopoly will lead to
a. excess profits for the firm.
b. losses for the firm.
c. zero profits for the firm.
d. One cannot tell without further information.
Changes in the size of an industry may cause supply to shift.
a. True
b. False
The laws of supply and demand force prices to an equilibrium.
a. True
b. False
When marginal cost exceeds marginal revenue,
a. marginal profit < 0
b. the firm should increase output.
c. marginal profit + marginal cost > marginal revenue.
d. marginal cost < marginal revenue − marginal profit.
An oligopoly is a market
a. with few buyers.
b. with one buyer.
c. dominated by a few sellers.
d. under the control of a few politically powerful individuals.
The payroll tax appears to be a proportional tax. In reality it is
a. highly progressive.
b. actually proportional.
c. highly regressive.
d. regressive on low-income persons and progressive on high-income persons.