Under certain circumstances, a congressional district may be a special interest group.
a. True
b. False
Refer to Exhibit 34-3. The world price is PW. If a tariff is imposed, the price rises to PW
+ T. Because of the tariff, producers’ surplus is __________ by an amount equal to the
area of __________.
Exhibit 34-3
a. increased; 1 + 2
b. decreased; 1
c. increased; 3 + 4
d. increased; 1
e. decreased; 3
Uncertainty
a. is the result of economic rent seeking.
b. is the same thing as risk.
c. exists when the probability of a given event can be estimated.
d. exists when the probability of a given event cannot be estimated.
e. none of the above
If the demand for agricultural products is price inelastic and the supply is dependent
upon weather conditions, then
a. price changes are likely to be small, and farm revenues are likely to be highly
volatile.
b. price changes are likely to be large, and farm revenues are likely to be highly
volatile.
c. prices are likely to be constant, and farm revenues are likely to be constant.
d. prices are likely to be constant, and farm revenues are likely to be highly volatile.
e. price changes are likely to be small, and farm revenues are likely to be constant.
Refer to Exhibit 21-6. I1, I2 and I3 are indifference curves and line ab is the relevant
budget constraint. Point N is
Exhibit 21-6
a. the consumer’s equilibrium position.
b. unattainable.
c. inferior to every other labeled point on the diagram.
d. attainable, but does not exhaust the consumer’s income.
Refer to Exhibit 30-2. The interest and interest rate on loan 1 are, respectively
a. $1,100 and 100 percent.
b. $1,100 and 10 percent.
c. 10 percent and $100.
d. $100 and 10 percent.
The minimum wage is a good example of a price floor.
a. True
b. False
Which of the following statements is false?
a. A government with the power to tax can solve the free rider problem.
b. A government with the power to tax can set a tax greater than the MEC when trying
to change the market outcome into the efficient outcome.
c. A government with the power to subsidize can set a subsidy greater than the MEB
when trying to change the market outcome into the efficient outcome.
d. Government can remove individuals from a prisoner’s dilemma setting by changing
the payoffs in the payoff matrix.
e. none of the above
In 2014 a woman won a $100 million lottery. Her income is (most likely) largely due to
her
a. hard work.
b. education.
c. highly marketable innate abilities.
d. good luck.
e. none of the above
A PPF is a straight line as a result of
a. constant opportunity costs.
b. increasing opportunity costs.
c. decreasing opportunity costs.
d. scarcity.
e. choice.
For a given firm, marginal factor cost is the same dollar amount no matter what quantity
of a factor it purchases. This firm is a
a. product price taker.
b. product price searcher.
c. factor price taker.
d. factor price searcher.
e. none of the above
If AFC is $8 at a quantity of output of 1,000 units, and ATC is $12 at the same level of
output, it follows that
a. marginal cost is $10.
b. AVC is $4,000.
c. total cost is $4,000.
d. marginal cost is $1,000.
e. AVC is $4.
As a firm produces more units of a good, its
a. fixed costs remain constant in the short run and its variable costs rise.
b. variable costs decline in the short run and its fixed costs rise.
c. fixed and variable costs remain constant in the short run.
d. variable costs remain constant in the short run and its fixed costs fall.
e. none of the above
Refer to Exhibit 28-5. In case (3), with a rise in the wage rate from W1 to W2, the wage
bill will rise if
Exhibit 28-5
a. Q1 x W3 > Q2 x W1.
b. (Q3 – Q2) x W3 > Q1 x W1.
c. (W2-W1) x Q2 > (Q1 – Q2) x W1.
d. (W2 – W3) x Q2 > (W2 – W3) x (Q3 – Q2).
There is no market failure if
a. the marginal private cost curve is upward sloping.
b. the demand curve (for a good or service) is downward sloping.
c. the demand curve lies about the marginal private cost curve.
d. marginal private costs are greater than the external costs associated with a negative
externality.
e. none of the above
The free rider problem is the main source of market failure in the provision of
nonexcludable public goods.
a. True
b. False
Consider the following data: equilibrium price = $10, quantity of output produced =
100 units, average total cost = $13, and average variable cost = $7. What will the firm
do and why?
a. Shut down in the short run, because it is taking a loss of $200.
b. Continue to produce in the short run, because price is greater than average variable
cost.
c. Shut down in the short run, because average variable cost is less than average total
cost.
d. Continue to produce in the short run, because firms are always stuck with having to
produce in the short run.
A PPF can
a. shift outward but not inward.
b. shift inward but not outward.
c. shift inward or outward.
d. shift neither inward nor outward.
List and describe the four assumptions that underlie the theory of perfect competition.
Define economies of scale and give two reasons why firms may experience economies
of scale.Is economies of scale a long-run concept or a short-run concept?
Suppose that the average price of refrigerators has fallen over the past few years, yet the
refrigerator companies have offered more and more of them for sale. Does this mean
that the supply curve for refrigerators is downward sloping? Explain.
List and describe the four broad categories of resources. Cite an example of each to
help support your answer.
Explain how a technological advancement in one sector of the economy can lead to a
change in the number of people who work in another sector of the economy.Give an
example to help support your answer.
Give a definition of an advance in technology. Suppose that you are drawing a PPF for
civilian goods and military goods, describe the effect on the PPF of an advance in
technology in both civilian goods and military goods.How would the impact on the PPF
be different if the technological improvement only helped in the production of military
goods, but not civilian goods?