At an equilibrium price for gasoline,
a. everyone with the desire and the income to buy gasoline at that price can do so.
b. surpluses are inevitable.
c. inherent market forces will eventually change the quantities demanded and supplied.
d. suppliers must be using the most efficient oil-drilling equipment available.
Unequal distribution of resources is one of the main reasons for international trade.
a. True
b. False
Which of the following is an example of a direct tax?
a. sales tax
b. property tax
c. gasoline tax
d. income tax
Last year, 1,000 cases of cough syrup were sold at $10; this year, 1,200 cases were sold
at $12 The most probable interpretation of these data is that the
a. supply and demand curves are shifting to the right.
b. supply and demand curves are shifting to the left.
c. supply curve has shifted to the left, with no change in demand.
d. demand curve has shifted to the right, with no change in supply.
The main reason why one nation trades with another is to
a. save its natural resources from rapid depletion.
b. exploit the advantages of specialization.
c. eliminate the danger of retaliation from other nations.
d. improve political alliances.
A tax is progressive if it raises a greater fraction of total tax revenue every year.
a. True
b. False
The federal income tax is a good example of a
a. regressive tax.
b. proportional tax.
c. digressive tax.
d. progressive tax.
Figure 7-9
Of the graphs in Figure 7-9, which represents total fixed cost?
a. 1
b. 2
c. 3
d. 4
If Japan is twice as good at producing cameras and three times as good at producing TV
sets as the United States, Japan is said to have a comparative advantage in TV sets and
the United States has a comparative advantage in cameras.
a. True
b. False
It is possible to analyze education decisions in a manner similar to the decision to
acquire more
a. capital.
b. leisure.
c. work.
d. goods and services.
Figure 5-10
In the indifference curve pictured in Figure 5-10, which of the following is clearly true?
a. B is preferred to D.
b. B is preferred to C.
c. A is preferred to B.
d. C is preferred to D.
Rising productivity usually reduces workers’ standards of living.
a. True
b. False
Economists consider rent seeking activity to be highly productive.
a. True
b. False
The interest rate is determined by
a. the supply and demand of loanable funds.
b. the supply and demand of land.
c. the supply and demand of marginal land.
d. None of the above is correct.
An import quota will ordinarily raise the price of the good in the importing country.
a. True
b. False
The environmental problems of China:
a. were caused by a lack of central planning in the economy.
b. were caused by the burning of low-quality, high-sulfur coal.
c. were caused by a lack of pollution controls.
d. All of the above are correct.
A monopolist’s demand curve implies that
a. the monopolist is a price taker.
b. the monopolist is a price maker.
c. it has nothing to do with the amount a monopolist can sell.
d. it can be downward sloping or horizontal depending on the price.
If the demand for steak shifts to the right, the most likely explanation is that
a. the price of cattle feed has fallen.
b. consumer income has risen.
c. the price of steak has fallen.
d. cattle production has fallen.
The difference between economic profit and accountant’s definition of profit is that an
economist’s total cost counts the ____ of inputs.
a. absolute value
b. overheads
c. opportunity cost
d. gross cost
A change in the price of important inputs will change the quantity supplied but will not
shift the supply curve.
a. True
b. False
TANF sets a lifetime cap for benefits at 10 years.
a. True
b. False
About _____% of Americans between the ages of 25 and 60 will experience at least one
year below the official poverty line.
a. 3%
b. 10%
c. 27%
d. 40%
The law of diminishing marginal utility guarantees that demand curves will have
positive slopes.
a. True
b. False
Which of the following is an extreme form of risk associated with investing in a foreign
country?
a. Credit risk
b. Labor unrest
c. Expropriation
d. Immigration rules
Graphically show a firm earning a profit; shade the appropriate profit rectangle. Explain
how the profit formula represented by the rectangle is analogous to TR – TC.
Will depletable resources such as oil, coal, and aluminum be exhausted if their prices
are left to the market?
The state is considering adding a satellite campus to its major university. How can
marginal analysis assist, even though the university does not attempt to maximize
profits?
Figure 14-3
In Figure 14-3, if person 1 and person 2 have the indicated quantities of cheese and
crackers, and are on the indicated indifference curves, is there the possibility of
mutually beneficial trade? Explain.
What is the flypaper theory of tax incidence? This theory is typically wrong. Why?
Why assume that firms maximize profit, when it is easy to find companies that pursue
other goals such as saving rain forests (Ben and Jerry’s) and sponsoring Mister Rogers
(Sears)?
How can it be that the U.S. spends more on education than many other nations, and
achieves far worse results? What may be the underlying reason?
Why do most economists favor emissions taxes over direct controls as a pollution
deterrent?
Explain how a diversified portfolio can reduce fluctuations in returns even when the
economy as a whole is experiencing contractions and expansions.
Complete the following table and determine the point of profit maximization.
