Economic theory is a necessity, not a luxury. This statement is true because theory
a. always leads to practical and useful policy.
b. can prevent depressions in the economy.
c. substitutes for vast amounts of data.
d. provides a structure for organizing and analyzing data.
e. always leads to accurate predictions.
Which of the following factors is always present in consumer decision making?
a. taxes
b. high prices
c. scarcity
d. changing consumer tastes
e. cost-of-living adjustments to income
A perfectly competitive firm is a “price taker” because it cannot sell its product for
more than the market price.
a. True
b. False
If nations begin to specialize in production for the purpose of trade,
a. the utility from consumption will increase, but not the total output.
b. total world output will increase, as well as well being from consumption.
c. total world output will increase, but well being from consumption will not.
d. neither total output nor well being from consumption will change.
e. the impact on total output and well being cannot be predicted.
What is the term used for the process by which an entrepreneur creates or recognizes a
new and better product, acquires it, and brings it to market, making older substitutes
obsolete?
a. creative destruction
b. innovation
c. the substitution effect
d. backward-bending innovation
A labor union is an organization representing workers in negotiations with employers
over wages, benefits, and working conditions.
a. True
b. False
The marginal cost of Alexa’s Guide to Street People and Their Pets is constant at $5
Alexa sells 5,000 copies per year at $20 per copy. She would like to increase readership
and hold total profit constant. If the price goes to $15, how many copies must she sell?
a. 10,000
b. 9,000
c. 7,500
d. 6,000
Free market economies have led to
a. high growth rates but low efficiency.
b. high efficiency and low growth rates.
c. high growth rates and high efficiency.
d. low growth rates and low efficiency.
All inferior goods have upward-sloping demand curves.
a. True
b. False
In Eastern Europe and the countries of the former Soviet Union,
a. grave environmental problems plague Eastern Europe.
b. the area suffers from widespread illness and countless premature deaths.
c. the Aral Sea, once the world’s fourth-largest inland sea, is now half its previous size.
d. All of the above are correct.
High prices redistribute wealth from consumers to firms.
a. True
b. False
The price of leisure is the
a. wage rate.
b. interest rate.
c. discount rate.
d. rate of return on investment.
During fiscal year 2012, the most recent mentioned in the text, the federal government
spent approximately
a. $1,7 billion
b. $1,9 trillion
c. $3,7 trillion
d. $14,0 trillion
If two countries have production possibilities curves with different slopes, there is no
possibility for gains from trade.
a. True
b. False
If a female supervisor is discriminated against by one of her workers who refuses to
cooperate, she may earn lower wages.
a. True
b. False
The cable and subscription TV business is plagued with the problem of ‘signal theft.”
People use illegal receivers to capture the company’s signal without paying.
Enforcement of the company’s property right is very expensive. This problem emerges
because TV signals are basically
a. economic goods.
b. invisible goods.
c. depletable goods.
d. public goods.
A monopoly firm always devotes some of its profits to research.
a. True
b. False
Goods are distributed among people by means of:
a. a central authority
b. prices
c. markets
d. all of these
Motorcycle helmet laws have been controversial in some states. Riders prefer the feel
of the wind on their faces. Others, however, point out that riders without helmets are
more likely to suffer severe injury and run up hospital bills at public expense. Which of
the following would most likely reduce the incidence of high bills for helmetless riders?
a. raise insurance rates for helmetless riders
b. lower insurance rates for helmetless riders
c. publish information on injury rates for helmetless riders
d. subsidize hospitals
Figure 7-15
In Figure 7-15, we would expect a move of the budget line from A to B if
a. the price of machines falls.
b. the price of labor falls.
c. output falls.
d. the product price rises.
List some of the problems that may arise when prices are controlled.
Who bears the burden of an excise tax if demand is perfectly inelastic; if supply is
perfectly inelastic? Use graphs in your explanation.
The U.S. economy is the largest in the world. What two factors primarily explain this?
What makes the U.S. economy unique?
Give some explanations for the decline in union membership in the United States.
Explain why taxes on pollutants reduce pollution while subsidies to firms cutting their
pollutants actually increase pollution.
While monopoly power can be abused, it can also be used beneficially. What are the
major pros and cons of largeness in business?
According to the text, when management selects a price or quantity, it also selects the
other. Explain why this is true.