In the long run all inputs are variable; in the short run some inputs are fixed.
Answer:
The distinction between capitalism and socialism is less relevant in the real world today
than it was 30 years ago.
Answer:
For a perfectly competitive firm, the profit-maximizing output level occurs where
marginal cost equals price.
Answer:
Free trade associations can actually be harmful.
Answer:
Since marginal revenue is less than price for a monopolist, a monopolist maximizes
profits by equating marginal revenue and marginal cost, not price and marginal cost.
Answer:
A dominant strategy means that one player will always win the game.
Answer:
Economists are likely to oppose direct regulation because they do not believe there is
any need for government to take action when negative externalities exist.
Answer:
Failure of market outcomes can occur even when the market is functioning properly.
Answer:
The recession that began with a housing market crash in 2009 had the effect of reducing
income inequality.
Answer:
The law of supply states that more of a good will be supplied the lower its price, other
things constant.
Answer:
The type of goods being imported has changed from primarily low-tech goods to
agricultural goods.
Answer:
The L3C type of corporation, sometimes called a benefit corporation, ignores profit
considerations and instead pursues only social goals.
Answer:
We can conclude from the table shown that Spain has a comparative advantage in the
production of tables.
Answer:
The minimum wage is an example of a price floor.
Answer:
“Framing effects” suggest that the wording of questions affects people’s survey
responses.
Answer:
Strategic reasoning applies to situations in which decisions are interdependent.
Answer:
If the price of a good goes up by 20 percent and the quantity demanded falls by 40
percent, the price elasticity of demand is
Answer:
Institutional discrimination exists when employers refuse to hire certain workers based
on factors not related to job performance.
Answer:
The endowment effect is used to describe the mistake a consumer makes when he or
she accounts for the monetary costs of his or her decisions but ignores the nonmonetary
opportunity costs.
Answer:
An excise tax on alcohol causes the supply of alcohol to decrease and the price of
alcohol to decrease.
Answer:
If average fixed cost is $2 and average variable cost is $3, total cost is $5.
Answer:
Quotas on imported automobiles cost jobs in the U.S. automobile industry but lower
auto prices for domestic consumers.
Answer:
A market in which a single firm hires labor but workers compete against one another for
jobs is a bilateral monopoly.
Answer:
A currency has depreciated in value if it takes more of a foreign currency to buy it.
Answer:
When per-unit costs increase as output increases, there are economies of scale in
production.
Answer:
A monopolist will always make a profit in the short run.
Answer:
The economic decision rule is to undertake an action only when the marginal benefits of
that action are greater than its total costs.
Answer:
Tariffs increase equilibrium price and quantity.
Answer:
Production possibility curves are upward-sloping because increased production of one
good implies reduced production of other goods.
Answer:
Science is justified through heuristic models.
Answer:
The United States has a trade deficit when the value of the goods and services we
import exceeds the value of the goods and services we export.
Answer:
If government requires a firm to implement a nudge, the government’s action is not a
nudge.
Answer:
The effect of successful compliance with recycling regulation by homeowners on the
market for recycled paper along with a concurrent rise in demand for products made
with recycled paper is best shown by a shift to the right in the supply of and demand for
recyclable paper and a certain drop in its price.
Answer:
Most likely, the elasticity of demand for transportation is greater than the elasticity of
demand for cars.
Answer:
Game theory suggests that when we act in our own immediate best interest, this leads to
the best of all possible outcomes.
Answer:
Refer to the following graph.
If price is currently at B and rises, total revenue will rise.
Answer:
If the government were to put policies in place to regulate carbon emissions from
factories, such a policy would be a:
A. nudge.
B. tariff.
C. tax.
D. push.
Answer:
When companies supersized luxury consumer products to cater to the superwealthy
who wanted to rise above the pack, this made use of the concept of:
A. conspicuous consumption.
B. focal point equilibrium.
C. bounded rationality.
D. rules of thumb.
Answer:
If resources are allocated efficiently in a market economy:
A. the way final goods and services are distributed does not matter to society.
B. the outcome may not be socially desirable if distributional issues are also important.
C. the outcome will always be socially desirable.
D. each person’s utility is maximized, and so the result is Pareto optimal.
Answer:
A firm’s demand for labor is derived from the:
A. opportunity costs associated with labor and leisure.
B. desires and needs of the entrepreneur.
C. cost of labor inputs.
D. demand for its output.
Answer:
Constant returns to scale are associated with a:
A. horizontal long-run average cost curve.
B. horizontal short-run average cost curve.
C. downward-sloping long-run average cost curve.
D. downward-sloping short-run average cost curve.
Answer:
A key assumption of public choice economics is that government officials are:
A. not rational.
B. not influenced by incentives.
C. rational and respond to incentives.
D. trying to do only what is best for society.
Answer:
The minimum food budget used to determine the poverty line was determined in the:
A. 1960s but has been recalculated every decade to account for rising standards of
living.
B. 1960s and is not recalculated to account for rising standards of living.
C. 1930s but has been recalculated every decade to account for rising standards of
living.
D. 1930s and is not recalculated to account for rising standards of living.
Answer:
Which of the following is not one of the three principal components of a socialist
economy?
A. Government ownership of the means of production
B. Workers directed by a government planning board as to where they will work and
how much they will be paid
C. Entrepreneurs are encouraged by the profit motive, rather than government directive,
to satisfy consumer wants in the most efficient manner possible
D. Distribution is according to need
Answer:
Suppose that initially, the equations for demand and supply are Qd = 48 – 4P and Qs =
4P – 16, respectively. If the quantity supplied increases by 4 at every price (so that the
supply curve shifts to the right), the equilibrium price will change from:
A. $8 to $7.50.
B. $8 to $12.
C. $12 to $8.
D. $7.50 to $8.
Answer:
Refer to the following graph.
Which of the following curves demonstrates a unit elastic demand curve? (That is, a
curve where elasticity is 1 at each point.)
A. A
B. B
C. C
D. None of the curves
Answer:
Refer to the graph shown that depicts a third-party payer market for prescription drugs.
If the co-payment is $2 per pill, what will be the total market expenditures on
prescription drugs?
A. $30
B. $90
C. $270
D. $540
Answer:
Ball State Professor John B. Horowitz in “Why Higher Real-Wages May Reduce
Altruism for the Poor” considers whether income redistribution toward greater income
equality is a public good or a public bad. If redistribution is a public bad, redistributing
income to the poor makes others feel that society is:
A. unjust and therefore decreases their utility.
B. unjust and therefore increases their utility.
C. more just and therefore decreases their utility.
D. more just and therefore increases their utility.
Answer:
Identifying the effect of an increase in the money supply on prices requires the use of:
A. positive economics.
B. the art of economics.
C. normative economics.
D. subjective economics.
Answer:
You’re maximizing utility when:
A. (MU of X)/(P of X) > (MU of Y)/(P of Y).
B. (MU of X)/(P of X) < (MU of Y)/(P of Y).
C. (MU of X)/(P of X) = (MU of Y)/(P of Y).
D. (MU of X)/(P of Y) = (MU of Y)/(P of X).
Answer:
Google Search and Yahoo Search are examples of:
A. free market pricing models.
B. government-implemented models.
C. coordinating mechanism designs.
D. auction markets.
Answer:
If marginal cost is greater than average total cost, average total cost:
A. is minimized.
B. is falling.
C. will not change.
D. is rising.
Answer:
If the quantity of houses supplied in an area increases 10 percent when the price goes
up 25 percent, the supply:
A. is elastic.
B. is inelastic.
C. is unit elastic.
D. is perfectly elastic.
Answer:
All of the following are arguments in support of protectionist legislation except:
A. increasing competition for domestic producers.
B. increasing political pressure on rogue nations.
C. increasing income equality.
D. increasing tax revenues.
Answer:
The equilibrium solution for the following payoff matrix is:
A. 1, 1.
B. 2, 0.
C. 0, 2.
D. -1, -1.
Answer:
In the United States, the government regulates business in its role as a “referee”. Which
of the following is not among the laws regulating the interaction between households
and businesses?
A. Businesses must follow certain rules about workplace safety, minimum wages, and
overtime rules.
B. Businesses cannot meet with other businesses to agree on prices they will charge.
C. In some businesses, in some states, employees must join a union in order to work at
certain jobs.
D. Businesses are required to produce certain goods, called public goods, for the
government.
Answer:
Refer to the graph shown. What distance represents average profits?
A. AB
B. BF
C. AF
D. FW
Answer:
A government airline safety regulation reduces the probability of a fatal airline crash by
0.005. If the costs associated with each airplane crash are equal to $600 million, the
regulation has an expected marginal benefit of at least:
A. $600,000.
B. $1,000,000.
C. $2,000,000.
D. $3,000,000.
Answer:
The president of the United States receives an annual salary of $400,000. Derek Jeter,
shortstop for the New York Yankees, receives an annual salary of $23.2 million. If the
president of the United States actually contributes more to society than Derek Jeter, we
can conclude that:
A. factors other than marginal revenue product probably explain the salary differences.
B. the salary differences are based entirely on marginal revenue products.
C. there is never a relationship between marginal revenue product and pay.
D. the markets for their respective services are perfectly competitive.
Answer:
Researchers have found that family income of obese women is about 17 percent lower
than that of women who are of the recommended weight. If researchers were able to
demonstrate that there is no difference in the productivity of women who are obese and
women who are of the recommended weight, this would suggest that the difference in
income:
A. is the result of discrimination.
B. cannot be explained by discrimination.
C. is due to differences in worker productivity.
D. is a mistake in the survey.
Answer:
Refer to the graph shown. If this monopolist were allowed to choose the
profit-maximizing level of output, it would produce:
A. 300 units of output.
B. 400 units of output.
C. 500 units of output.
D. 800 units of output.
Answer:
Monopolies:
A. earn the profits needed for research and development and have the strongest
incentive to innovate.
B. may earn the profits needed for research and development, but they seldom have the
incentive to innovate.
C. seldom earn the profits needed for research and development, but they have the
strongest incentive to innovate.
D. seldom earn the profits needed for research and development and have no incentive
to innovate.
Answer:
Refer to the graph shown. The poorest 30 percent of the families earn:
A. 2 percent of the income.
B. 5 percent of the income.
C. 9 percent of the income.
D. 15 percent of the income.
Answer:
Diseconomies of scale are associated with:
A. decreasing per-unit costs.
B. improved team spirit.
C. the short run.
D. monitoring costs.
Answer:
Refer to the graph shown. If market price is currently $7.00 per unit, this perfectly
competitive firm will maximize profit by producing:
A. 450 units of output.
B. 650 units of output.
C. 850 units of output.
D. between 550 and 650 units of output.
Answer:
eBay.com is a vast auction site that is similar to a competitive market in some ways but
differs from it in others. Which of the following describes how eBay resembles a
competitive market?
A. It is easy to enter and easy to leave eBay.
B. Sellers sometimes do not describe the products accurately on eBay.
C. There is a great variety of different products sold on eBay.
D. On eBay the large sellers dominate the market.
Answer: