The profit-maximizing natural monopoly will
a. set price equal to marginal cost.
b. produce the quantity of output at which MR = MC.
c. charge the highest price per unit for the quantity of output it chooses to produce.
d. necessarily face higher production costs if it is unregulated than if it is regulated.
e. b and c
To an economist, the terms factor and resource are synonyms.
a. True
b. False
Perfectly competitive firms are price takers for all of the following reasons except that
a. each firm is quite small relative to the total market supply.
b. buyers and sellers have all the necessary information about prices, etc.
c. the product is homogeneous.
d. barriers to exit force firms to sell at the market price.
Which of the following statements is true?
a. The marginal cost curve has an upward-sloping portion to it because of the law of
diminishing marginal returns.
b. The marginal cost curve cuts the ATC curve at its highest point.
c. When marginal cost is rising, so must average total cost be rising.
d. A decline in marginal cost causes the MPP (of the variable input) to decline.
e. none of the above
Suppose that the price of butter is $3 per pound and the price of margarine is $2 per
pound.If the price of butter rises to $3.90 and the price of margarine rises to $2.20, then
the absolute price of butter has _______________ and the relative price of butter has
_______________.
a. risen; fallen
b. fallen; risen
c. risen; risen
d. fallen; fallen
Thomas Edison played a key role in putting together the Movie Trust which reportedly
tried to eliminate competition in the early days of the movie industry.
a. True
b. False
In the case of a negative externality,
a. marginal external costs are greater than marginal private costs.
b. marginal external costs are less than marginal private costs.
c. marginal external benefits are greater than marginal private benefits.
d. marginal external benefits are equal to marginal private costs.
e. none of the above
Which of the following statements is false?
a. A corporate bond typically has face value of $1,000.
b. Corporate bonds typically sell for a price that is equal to the bond’s face value.
c. The interest that corporate bonds pay is fully taxable.
d. State and local governments issue municipal bonds.
Refer to Exhibit 20-9.What is the price elasticity of supply between $2 and $4?
Exhibit 20-9
a. 2.0
b. 0.75
c. 1.33
d. 0.50
Why would a candidate for political office speak in general instead of specific terms?
a. Because he or she believes voters want to hear generalities, not specifics.
b. Because he or she believes voters are too busy to listen to specifics.
c. Because he or she believes that specifics are too likely to label him or her as a
member of an extreme-wing, and politically this would be undesirable.
d. Because it is cheaper to get the message out if it is worded in general instead of
specific terms.
A single-price monopolist with the same demand and cost conditions as a perfectly
price-discriminating monopolist produces __________ output than the perfectly
price-discriminating monopolist and __________ resource-allocative efficient.
a. less; is
b. less; is not
c. more; is
d. more; is not
The primary difference between private goods and public goods is that
a. private goods are consumed by private individuals whereas public goods are not
consumed by private individuals.
b. private goods often yield externalities but public goods do not.
c. property rights can be assigned to public goods but not to private goods.
d. public goods are nonrivalrous in consumption whereas private goods are rivalrous in
consumption.
In order for an individual to achieve consumer equilibrium through the consumption of
two goods, A and B, that individual must fulfill the condition
a. TUA = TUB.
b. TUA/PA = TUB/PB.
c. MUA = MUB.
d. MUA/PA = MUB/PB.
e. MUB/PA = MUA/PB.
Refer to Exhibit 3-10. 300 units of X will be exchanged in this market if the price is
Exhibit 3-10
a. $30.
b. $20.
c. $10.
d. none of the above
“Screening” is the process used by
a. employers to increase the probability of choosing good employees based on certain
criteria.
b. tax evaluators to make sure that business firms pay the amount of taxes they owe.
c. employees to try to get their wages up.
d. employers to spy on their competitors.
e. none of the above
If we define poverty using absolute terms, it follows that
a. people are poor if they earn less than a specified income level.
b. there can be situations in which no one would be considered poor.
c. poverty exists if the Gini coefficient is small.
d. b and c
e. a and b
Special interest groups often engage in rent seeking, which is a socially wasteful
activity.
a. True
b. False
The supply of loanable funds curve is
a. upward sloping.
b. downward sloping.
c. perfectly elastic.
d. perfectly inelastic.
Refer to Exhibit 20-2. The market for good X is initially in equilibrium at $5. The
government then places a per-unit tax on good X, as shown by the shift of S1 to S2.
Approximately what percentage of the tax do consumers end up paying?
Exhibit 20-2
a. 63 percent
b. 45 percent
c. 70 percent
d. 55 percent
e. 25 percent
If the economy is on the production possibilities frontier (PPF), the economy is
a. productive inefficient.
b. operating with no unemployed resources.
c. productive efficient.
d. b and c
e. none of the above
One of the objectives of the health-care reform bills passed in March 2010 was to bring
_____________ people into the pool of insured persons so that insurance policies
would become ________________.However, provisions in the bill are likely to make
the average cost of an insurance policy _____________ than it would have been
without reform.
a. fewer; cheaper; lower
b. fewer; more expensive; lower
c. more; cheaper; lower
d. more; cheaper; higher
e. none of the above
The wage rate increases 10 percent, and the quantity demanded of labor falls by 25
percent. The absolute value of the elasticity of demand for labor is
a. 0.40.
b. 2.50.
c. 0.25.
d. 5.00.
e. none of the above