For which of the following medical goods or services is the income elasticity of
demand largest?
a. Emergency services after a car accident.
b. Measles shots.
c. Physical examinations for life insurance applications.
d. Medical tests to diagnose specific symptoms.
e. Face-lifts.
The two tendencies of a firm in a cartel are the incentive to:
a. cheat to maximize joint profits and the incentive to raise prices.
b. cheat and avoid collusion and the incentive to raise price to maximize the firm’s share
of profits.
c. increase output in order to minimize per-unit cost and the incentive to reduce price in
order to maximize joint profit.
d. cooperate to maximize joint profits and to cheat on the agreement in order to increase
the firm’s share of the profit.
Suppose a consumer is spending all of his/her income on two goods, A and B, in a
manner where MUa = 15 and MUb = 75, and the Pa = $3 and the Pb = $15, then the
consumer:
a. is maximizing his/her utility.
b. should increase his/her purchases of B and decrease the purchases of A.
c. should spend more money on both goods.
d. should spend less money on both goods.
e. should increase the purchases of A and decrease the purchases of B.
Policies to create jobs in the nation are the concern of:
a. macroeconomics.
b. microeconomics.
c. both microeconomics and macroeconomics.
d. neither microeconomics nor macroeconomics.
Exhibit 12-1 Income distribution for three countries
Exhibit 12-1 shows the percentage of income received by each population quintile. In
Country III, we can conclude that the:
a. majority of the people receive the majority of the income.
b. richest 20 percent of the population received 75 percent of the economy’s income.
c. richest 20 percent of the population received 78 percent of the economy’s income.
d. richest 40 percent of the population received 78 percent of the economy’s income.
e. least-wealthy 40 percent of the population received 78 percent of the economy’s
income.
In a perfectly competitive industry, which of the following is true?
a. The competitive price is higher and quantity higher than the socially efficient point.
b. The competitive price is higher and quantity lower than the socially efficient point.
c. Since the industry is perfectly competitive, price and quantity are at the socially
efficient levels.
d. The competitive price is lower and quantity higher than the socially efficient point.
Although U.S. Steel controlled nearly 75 percent of the domestic iron and steel industry,
in 1920 the Supreme Court ruled that the firm was not in violation of the Sherman
Antitrust Act because there was no evidence of abusive behavior. What antitrust
doctrine was the court applying in this case?
a. The rule of reason. c. The marginal cost pricing rule.
b. The per se rule. d. The natural monopoly rule.
Which of the following are not counted when we compare a family’s income to the
poverty line?
a. In-kind transfers such as food stamps, Medicaid, and public housing.
b. Cash welfare payments such as from social security.
c. Cash payments when a worker becomes unemployed.
d. Both a. and b. above are correct.
When economists say scarcity, they mean:
a. there are only a limited number of consumers who would be interested in purchasing
goods.
b. the human desire for goods exceeds the available supply of time, goods and
resources.
c. most people in poorer countries do not have enough goods.
d. goods are so expensive that only the rich can afford it.
Suppose a firm has an output of 10,000 cans and a total fixed cost of $2,000. At an
output of 5,000 the difference between the total cost and the total variable cost is:
a. b and c.
b. $0.40.
c. the average fixed cost.
d. $2,000.
e. $0.20.
Which of the following is not a characteristic of capitalism?
a. Private ownership of the factors of production.
b. Businesses make their own product and price decisions.
c. Public ownership of the factors of production.
d. Decentralized decision-making using markets.
The government will have to subsidize a natural monopoly in the long run if regulators
choose to pursue:
a. marginal cost pricing c. per se pricing.
b. fair-return pricing.
The main attractive feature(s) of a negative income tax program is (are):
a. c and d.
b. c, d, and e.
c. it is simple.
d. it avoids the stigma of hand-outs.
e. it only subsidizes the unemployed.
Voluntary recycling is available in many parts of the country. If citizens of these areas
have collected recyclable material at home, they can bring it to a recycling center. These
materials reduce landfill space, reduce the need for virgin material extraction, and
provide an inexpensive input in many production processes. The information in this
question suggests what about areas without voluntary recycling?
a. Externalities exist.
b. There is mandatory recycling.
c. Raw materials are less expensive.
d. The cost of production is higher.
e. Nothing.
Exhibit 10-2 A monopolistic competitive firm
As represented in Exhibit 10-2, the maximum long-run economic profit earned by this
monopolistic competitive firm is:
a. zero. c. $1,000 per week.
b. $200 per week. d. $20,000 per week.
Graphically, the marginal revenue curve of a monopolist:
a. will sometimes lie below the demand curve of the monopolist.
b. will always lie below the demand curve of the monopolist.
c. is the same as the demand curve of the monopolist.
d. will equal 1 when the elasticity of demand is unitary.
What is the shape of the average total cost curve for a firm in the short run?
a. U-shaped.
b. A horizontal line.
c. A vertical line.
d. A curve that slopes upward to the right.
The finite nature of the economy’s resource base:
a. will be solved if only we would learn to conserve.
b. is only a problem in developing countries.
c. will be solved as technology advances.
d. will always be with us.
Which of the following is true in long-run equilibrium for both perfect competition and
monopolistic competition?
a. Accounting profit is zero.
b. Marginal cost equals price.
c. Long-run average cost is at a minimum.
d. Economic profit is zero.
Exhibit 9-8 Profit maximizing for a monopolist
As shown in Exhibit 9-8, the monopolist’s total cost is which of the following areas?
a. P1AEP5.
b. P2BDP4.
c. P3CDP5.
d. P4DEP5.
e. None of these.
If a negative income tax system were implemented, then the poor would have no
incentive to find work.
A downward-sloping straight line exhibits a direct relationship between two variables.
Adam Smith believed that a nation would produce the maximum wealth by relying on
government to make public interest economic decisions.
A country’s balance on current account will always equal its balance on capital account.
If marginal revenue exceeds marginal cost in the short run, the perfectly competitive
firm earns an economic profit in the short-run.
Describe in general terms four or five characteristics of less-developed countries.
If the yen price of dollars falls, then the dollar price of yen rises.
In economics, the term ‘surplus” means an excess quantity supplied.
A negative income tax program provides a simple way to assist the unemployed.
Describe the differences between capitalism and socialism.