The economic question of what will be produced is
a. primarily answered by the government in a system of pure capitalism
b. primarily answered by markets in a command economy
c. faced by all economies regardless of their wealth
d. does not have to be answered by economies possessing great wealth
e. cannot be illustrated by the economic concept of the production possibilities frontier
Imagine that there are only two nations in the world, the United States and Mexico. If
Americans buy more goods made in Mexico, other things constant, the
a. U.S. demand curve for Mexican pesos will shift rightward
b. U.S. demand curve for Mexican pesos will shift leftward
c. U.S. supply curve of Mexican pesos will shift leftward
d. U.S. supply curve of Mexican pesos will shift rightward
e. U.S. supply curve of Mexican pesos will shift upward
The present value of a promise to pay $5,000 every year forever when the prevailing
interest rate is 10 percent equals
a. $5,000
b. $50,000
c. $100,000
d. $250,000
e. $500,000
If the quantity of labor Sam supplies to a job is zero over the realistic range of wages,
Sam
a. is either unwilling or unable to perform the job
b. has not been hired to do the job
c. has not been hired to do the job at the going market wage rate
d. is unable to perform the job
e. is unwilling to perform the job
Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing
According to Exhibit 2-12, Hans’ opportunity cost of typing one page is
a. 12 loads of laundry
b. 8 loads of laundry
c. 3/2 of a load of laundry
d. 2/3 of a load of laundry
e. impossible to compute
If a firm’s economic profit is positive, its accounting profit must also be positive.
a. True
b. False
As Product Co. adds the first four workers to its production process in the short run, its
output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely
lead to an output rate
a. greater than 51
b. equal to 51
c. less than 51
d. greater than 51 if the firm experiences diseconomies of scale
e. none of the above
Exhibit 11-2
In Exhibit 11-2, economic rent at equilibrium equals
a. $40
b. $80
c. $160
d. $16
e. $8
The supply of paintings by Van Gogh is most likely to be
a. of infinite elasticity because supply is limited
b. of high elasticity because supply is limited
c. elastic because the paintings are luxury goods
d. inelastic because supply is limited
e. unit elastic
If an established domestic industry is in jeopardy of being displaced by lower-priced
imports, there could be a rationale for
a. permanent import restrictions to prevent the decline of the domestic industry
b. temporary import restrictions to allow the orderly adjustment of the domestic
industry
c. permanent import restrictions based on the infant industry argument
d. temporary import restrictions based on the infant industry argument
e. temporary import restrictions that will be replaced by permanent tax breaks for the
domestic industry
If the price of a haircut (a normal good) increases, other things constant, the
a. demand for haircuts increases
b. demand for haircuts decreases
c. quantity demanded of haircuts decreases
d. quantity demanded of haircuts increases
e. demand for haircuts, or quantity demanded of haircuts decreases; they are the same
thing
Exhibit 9-4
What is the revenue-maximizing output for the monopolist represented in Exhibit 9-4,
assuming it does not price discriminate?
a. 0 units
b. 2 units
c. 3 units
d. 4 units
e. 5 units
The bulk of exports from non-industrial countries are
a. manufactured goods
b. primary products
c. agricultural goods
d. natural resources
e. raw sugar products
Raghib teaches mathematics at Camford University and receives $40,000 per year. His
spouse, Noraini, works as a self-employed computer programmer and charges $40 per
hour. Which of the following is true?
a. Raghib’s income is personal interest; Noraini’s is wages
b. Raghib’s income is a salary; Noraini’s is personal interest
c. Both Raghib and Noraini receive proprietor’s income
d. Both Raghib and Noraini receive wage or salary income
e. Raghib’s income is a salary, and Noraini’s income is a proprietor’s income
Comparative advantage is determined by
a. the amount of resources needed to produce a good
b. the money cost of producing any good
c. the opportunity cost of producing any good
d. absolute advantage and production possibilities combined
e. the level of demand for a good
According to the search model, a computerized dating service should
a. reduce the amount of search
b. not affect the amount of search
c. increase quality dispersion
d. reduce quality dispersion
e. lower the marginal benefit of search
Exhibit 6-15
Which area in Exhibit 6-15 represents consumer surplus at market equilibrium?
a. area a
b. area b
c. area c
d. areas a + b + c
e. areas a + b
Which of the following is true of U.S. farm products over the past few decades?
a. The increase in supply has been greater than the increase in demand, which has led to
an increase in price.
b. The increase in supply has been less than the increase in demand, which has led to an
increase in price.
c. The increase in supply has been greater than the increase in demand, which has led to
a decrease in price.
d. The increase in supply has been less than the increase in demand, which has led to a
decrease in price.
e. The increase in supply has been greater than the decrease in demand, which has led to
an increase in price.
Because firms in an oligopoly are interdependent, they attempt to maximize revenues
rather than profits
a. True
b. False
An increase in supply will cause a(n)
a. increase in demand
b. decrease in demand
c. increase in quantity demanded
d. decrease in equilibrium quantity demanded
e. increase in equilibrium price
Firms price discriminate because, by doing so, they obtain a higher profit than by
charging a single price.
a. True
b. False
The “division of labor” refers to
a. discrimination in labor markets
b. separating a job into smaller tasks completed by different people
c. one worker who divides his time among different jobs and duties
d. defining a job according to the appropriate sex
e. the fact that two 20-year-olds are more productive than one 40-year-old
One reason for international specialization in production is
a. a high tariff imposed by a national government
b. a low tariff imposed by a national government
c. diminishing returns to a variable factor of production
d. the different resource endowments throughout the world
e. high fixed costs of production
If supply is elastic, the imposition of a tax
a. falls more heavily on consumers
b. falls more heavily on producers
c. falls more heavily on monopoly sellers than competitive sellers
d. will alter both buyer and seller plans equally
e. change seller expectations about consumer tastes
If ten cases of pretzels are sold at a price of $8 each and the marginal product of the last
unit of labor is 5, the firm’s total revenue is
a. $80
b. $30
c. $50
d. $6
e. $150
What act of Congress declared restraint of trade illegal and declared any attempt at
monopolizing unlawful?
a. the Celler-Kefauver Anti-Merger Act
b. the Sherman Antitrust Act
c. the Clayton Act
d. the Wheeler-Lea Act
e. the Clayton-Celler Act
The advantage of game theory is that it allows us to focus on the
a. individual firm’s incentives to cooperate or not
b. relationship between the market and firm level demand curve
c. costs and benefits
d. government regulators and the firms in an industry
e. models where there are no barriers to entry
If Joel buys ten floppy disks, which are worth a total of $30 to him, and he pays $1 a
disk, how much consumer surplus does he derive?
a. $24
b. $15
c. $20
d. $10
e. $2 from each floppy disk
Exhibit 17-7
Exhibit 17-7 represents the consumer market for driving their automobiles. If drivers
base their driving decisions only on the marginal private cost of driving their cars, how
many miles will they drive?
a. 1,000 miles
b. 2,000 miles
c. 3,000 miles
d. 4,000 miles
e. 5,000 miles
A firm facing a downward-sloping demand curve sells 50 units of output at $10 each.
The firm’s marginal revenue is
a. $500
b. more than $10 but less than $500
c. $10
d. less than $10
e. zero