Individuals will have different value judgments about the appropriate rate of
unemployment and the appropriate rate of inflation.
a. True
b. False
Figure 6-2
From Figure 6-2, we can infer that demand is ____ between P = 12 and P = 10 and ____
between P = 6 and P = 4.
a. elastic; elastic
b. elastic; inelastic
c. inelastic; elastic
d. inelastic; inelastic
If countries where wages are far lower than those in the U.S. manufacture similar but
vastly cheaper products, then:
a. U.S. consumers will buy those cheaper products
b. U.S. producers will lose customers
c. There will be a downward pressure on U.S. wages, and reduced employment
d. All of the above statements are true.
The “infant industry argument” recommends protectionism for industries that produce
children’s clothing.
a. True
b. False
According to economist Schumpeter, the first step in entrepreneurial growth is:
a. little competition
b. monopoly power
c. zero economic profits
d. creative destruction
A price increase will always increase a firm’s revenue.
a. True
b. False
Figure 5-14
Martha initially buys the combination of pens and pencils shown as A in Figure 5-14.
After the prices of both goods change, she buys combination B. It must be true that
a. Martha prefers A to B.
b. Martha prefers B to A.
c. Martha is indifferent between A and B.
d. Martha’s preferences between A and B cannot be determined from the information
given.
Perfect competition is the term used to describe
a. an industry in which all businessmen are honest and accommodating.
b. an industry in which numerous firms produce identical products.
c. an industry untouched by government regulation.
d. the kind of industry any American would support.
Elasticity is a measure of the responsiveness of change in quantity demanded to a
change in price.
a. True
b. False
Between 1980 and 2008 recycling in the United States has
a. decreased by less than 2%.
b. increased by less than 2%.
c. doubled.
d. tripled.
Certain goods are related such that an increase in the price of one good decreases the
quantity demanded of the other. These goods are
a. complements.
b. substitutes.
c. luxury goods.
d. competing goods.
Which of the following acts prohibits directors of one company from sitting on the
board of a competitor?
a. Sherman Act
b. Federal Trade Commission Act
c. Robinson-Patman Act
d. Clayton Act
A car sells at different prices at different dealerships in an oligopolistic market. If a
consumer has imperfect information about the price of a car at each dealership, he
should
a. always gather all available information about prices.
b. gather information about prices until the expected marginal utility of more
information equals the marginal cost of gathering it.
c. gather information about prices only if it can be gathered without cost.
d. ignore information about prices because it is irrelevant to making an “optimally
imperfect” decision.
Game theory applies to problems that arise in
a. perfect competition.
b. monopolies.
c. oligopolies.
d. pure competition.
A ____ is a graph whose axes show the quantities of two inputs that are used to produce
some output.
a. production indifference map
b. two-variable diagram
c. scalar diagram
d. time-series graph
Competition reduces some but not all discrimination. Where can one expect
competition to reduce discrimination, and where is discrimination likely to go on even
if there is competition?
What is the role of value judgments in economic analysis?
If Japan and the United States engage in trade, and Japan gains as a result of the trade,
does that mean the United States has lost in some manner?
Distinguish between the economist’s definition of profit and the accountant’s definition.
Which is superior for decision making?
Perfect competition displays the market mechanism at its best in many respects, yet
most markets in operation today are monopolistic or oligopolistic, composed of a few
large firms. Should government regulation break up those large firms into several
smaller firms to try to achieve perfect competition? Why or why not?
After the Arab oil embargoes, there was concern about the impact of higher gas prices
on the low-income worker. The government imposed price controls on oil to protect the
poor from this situation. Explain the inefficiency of this price ceiling and how taxes,
rather than prices, could be used to solve the problem.