If demand is elastic, an increase in price will increase total revenue.
a. True
b. False
Under a regressive tax, the fraction of income paid in taxes
a. rises as income rises.
b. is unchanged as income changes.
c. falls as income rises.
d. is proportional to the change in income.
Sugarcane can be used for producing both sugar and ethanol. New regulations in certain
countries now allow a higher level of ethanol in gasoline. An economist would expect
sugarcane prices to ____, and quantity sold to ____.
a. rise; rise.
b. fall; fall.
c. rise; fall.
d. fall; remain the same.
Figure 5-11
In Figure 5-11, a consumer is initially at point A. There is a price change and she moves
to B. It follows that
a. the demand for beer follows the law of demand.
b. the demand for beer does not follow the law of demand.
c. wine is an inferior good.
d. the consumer is confused.
Suppose that a community seeks to preserve air quality, and zones a “green belt” around
the city which prevents property development within the belt. What is the most likely
result of this law?
a. Interest rates will increase.
b. Labor income will increase.
c. Economic rent will increase.
d. Profits will increase.
Economic rent is paid only to land, and not to other resources.
a. True
b. False
Figure 4-16
Assume that Figure 4-16 shows the supply of orange juice. A decrease in the wage rate
paid to workers in the orange juice industry will shift supply from
a. S1 to S2.
b. S2 to S1.
c. S3 to S2.
d. S3 to S1.
An efficient allocation of resources requires each product’s price to equal its marginal
cost.
a. True
b. False
A local flower grower grows products in a plot of land which is exceptionally colorful,
and is admired by many passersby. There is no way to charge for this in the price of the
flowers. We can safely conclude that
a. the florist produces too many flowers.
b. the florist produces too few flowers.
c. the florist produces the right amount of flowers.
d. society pays the socially optimal amount for the flowers.
The market mechanism is more efficient in allocating resources between time periods
than it is in allocating resources among different industries.
a. True
b. False
The way in which a country benefits from trade is that it can
a. obtain goods at lower opportunity cost than producing them itself.
b. exploit economies of scale in production and lower the cost of goods it produces.
c. obtain a wider range of goods than it can produce for itself.
d. All of the above are benefits.
Historical data on prices and quantities sold do not provide the basis for drawing an
accurate demand curve because
a. reporters who gather these data are often wrong.
b. factors other than price may change over time.
c. they do not include measures of price close to the quantity axis.
d. they sometimes tend to be clustered around one point.
Mutually beneficial trade is possible because of differing marginal utilities.
a. True
b. False
History has shown that over the long run, labor-saving technology has actually not
reduced employment.
a. True
b. False
If a country begins to import more of a commodity, one can normally expect the price
of the commodity to
a. remain unchanged in that nation.
b. rise and then fall below where it was originally.
c. rise in that nation.
d. drop in that nation.
The supply-demand mechanism will bring an international market into equilibrium
a. at a price below the domestic price.
b. where domestic supplies are less than domestic demand.
c. with one nation’s price higher than the other nation’s price.
d. when the quantity demanded for exports is equal to quantity supplied.
Marginal revenue is the addition to total revenue resulting from the addition of one unit
to total output.
a. True
b. False
The supply curve of truck drivers is upward sloping and demand curve is downward
sloping. A reduction in the price of hauling freight by truck relative to the price of
hauling freight by rail will ____ the equilibrium wage of truck drivers and ____ the
number of drivers employed.
a. decrease; decrease
b. decrease; increase
c. increase; decrease
d. increase; increase
Which of the following statements regarding the cheap foreign labor argument is
correct?
a. If there is an abrupt change in foreign competition that severely penalizes American
workers, the U.S. government should immediately adopt protectionist measures.
b. In the long run, labor will be cheap (wages are low) in those nations where labor is
most productive.
c. If workers in other countries are willing to supply their products with little
compensation, this must ultimately raise the standard of living of the average American
worker.
d. American workers can never suffer from foreign competition since our monetary and
fiscal policies always produce high employment at home.
In the long run,
a. all of the firm’s input quantities are variable.
b. the firm can vary the quantities of some but not all inputs.
c. managers become less efficient.
d. the total cost of producing any given level of output is greater than or equal to the
short-run total cost of producing that level of output.
The most widely used approach for the analysis of oligopoly behavior is
a. game theory.
b. role playing.
c. strategic engineering.
d. input-output analysis.
Compared to other countries, the U.S. federal government relies
a. more heavily on direct taxes than do governments of other countries.
b. less heavily on direct taxes than do governments of other countries.
c. more heavily on indirect taxes than do governments of other countries.
d. on direct taxes about as heavily as do governments of other countries.
The position of the supply curve in the market for garbage removal
a. is irrelevant since the cost is fixed.
b. depends on the marginal cost of garbage removal.
c. depends on the demand for garbage removal services.
d. is unaffected by taxes levied per household amount of garbage.