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Which of the following statements is equivalent to the law of diminishing marginal
returns?
a. A stitch in time saves nine.
b. You can't make an omelet without breaking eggs.
c. Too many cooks spoil the broth.
d. If you can't stand the heat, get out of the kitchen.
When price is below the equilibrium level, there is a shortage of the commodity being
sold.
a. True
b. False
One benefit of a negative income tax is that it would increase work incentives.
a. True
b. False
The relationship between the quantity of labor supplied and the wage is governed by an
income effect and a substitution effect.
a. True
b. False
Bondholders have a "prior claim" over stockholders on a company's earnings or its
assets.
a. True
b. False
Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third
cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is
equal to
a. $.50, the value of her last cup of coffee.
b. $1.00, the value of her first cup of coffee.
c. marginal utility.
d. $2.25.
e. $1.50.
Many economists argue that there is imperfect information in the market and that this is
a failure of the market mechanism.
a. True
b. False
Price increases always reduce economic efficiency.
a. True
b. False
Economists consider price discrimination to always be undesirable.
a. True
b. False
When all prices are set equal to marginal costs,
a. consumers buy more than they should.
b. consumers will get less utility.
c. markets are giving correct signals to consumers.
d. producers make excessive profits.
When the price of a commodity rises, we can expect
a. marginal utility of the last unit purchased will rise.
b. marginal utility of the last unit purchased will fall.
c. marginal utility of the last unit purchased will be unaffected.
d. purchases to rise because of the increased marginal utility.
An important assumption that is made when constructing a demand schedule is that
a. only price and quantity matter in determining demand.
b. people always want a certain amount of a product.
c. demand is too important to be left to the economists.
d. all other determinants of demand are held constant.
e. demand has a positive slope.
Which of the following is least likely to be an example of peak/off-peak pricing?
a. breakfast cereals
b. hotels
c. wireless service
d. electricity
The advantages of emissions permits over taxes is/are:
a. it reduces undertainty about the quantity of pollution that will be emitted.
b. environmental authorities decide on an emissions ceiling in advance of issuing
permits.
c. pollutants can be limited to levels which do not affect health.
d. All of the above are correct.
Many states charge a 10-cent deposit on every can of soda sold. A purchaser pays an
extra 10 cents per can and will get his money back by returning the empty can to a
store. This policy encourages recycling by
a. increasing the supply of recyclable materials.
b. shifting in the demand curve for canned soda.
c. raising the opportunity cost of discarding empty cans.
d. taxing the production of canned soda.
The price of coal fell and the quantity sold also fell. Everything else being equal, it is
consistent that
a. the price of oil fell.
b. coal miners received large wage increases.
c. more efficient mining equipment was installed.
d. consumer incomes rose.
e. the supply of coal fell.
The relative concept of poverty is based on how far behind average income a particular
family gets.
a. True
b. False
A market system tends to create inequality.
a. True
b. False
GDP is a measure of the total output of an economy.
a. True
b. False
The marginal revenue curve for a monopolist
a. is identical to its demand curve.
b. is always below its demand curve if the demand curve is downward sloping.
c. is always below its demand curve if the demand curve is horizontal.
d. typically crosses the average revenue curve.
What percentage of American workers now belong to labor unions?
a. less than 20 percent
b. about 40 percent
c. about 60 percent
d. more than 80 percent
The opportunity cost of postponing income to some future time depends on the interest
rate.
a. True
b. False
Which of the following observations concerning poverty rates in America is true?
a. Major increase in poverty in the decade from 1963 to 1973.
b. It hit an all-time low by 1983.
c. The economic boom of the 1990s restored it almost to its 1970s levels.
d. It decreased from 2007 to 2009.
Trade between two nations is complicated by
a. the variability in exchange rates of the respective nation's currencies.
b. different production techniques in the nations.
c. the age and experience of the respective nation's diplomats.
d. the variability in climate between the nations.
In reality, firms may seek to maximize
a. sales.
b. profits.
c. market share.
d. All of the above can be correct, depending upon management, owners, and other
factors.
