An efficient distribution of goods requires that
a. everyone gets an equal share of each good.
b. marginal cost equal marginal utility for the last unit produced.
c. each person derives the same total utility from the good.
d. since tastes differ, every person pays a different price in accordance with different
marginal utilities.
Define the following terms. Give a complete and precise definition in one sentence.
a. total utility
b. marginal utility
c. consumer’s surplus
d. “law” of demand
Figure 19-2
The demand curve for the input in Figure 19-2 is
a. ABCD.
b. CDEF.
c. BCDE.
d. EF.
Herbert Simon has concluded that decision making in industry is often best described as
a. optimizing behavior.
b. profit maximizing.
c. satisficing.
d. saturating.
Repeated games can lead to tacit collusion.
a. True
b. False
Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.
a. True
b. False
Utility is the pleasure, satisfaction, or enjoyment derived from consumption.
a. True
b. False
The income effect of higher wages leads workers to want to work more.
a. True
b. False
If you discover that the opportunity cost of raising your economics grade is zero, you
a. are studying too hard and receiving a higher grade than is optimal for you.
b. must be on the production possibilities frontier that describes your trade-offs between
producing high grades and producing other goods.
c. must be inside the production possibilities frontier that describes your trade-offs
between producing high grades and producing other goods.
d. must be producing more of other goods than is optimal for you.
Collaborative research is especially important in high-technology sectors because a
single firm might not have the resources to develop a significant innovation.
a. True
b. False
The fact that invention is based largely on fixed costs and is a public good means that
which of the following is not relevant to the process?
a. average total cost
b. marginal cost
c. external cost
d. average variable cost
In a market system, the primary instruments used to coordinate economic activity are
a. plans.
b. prices.
c. input-output analyses.
d. quantities.
For a corporation, issuing bonds is riskier than issuing stock.
a. True
b. False
Nondiscriminatory firms hiring in the market place have a cost advantage.
a. True
b. False
Since an individual spends a small share of her income on salt, the elasticity of demand
is likely to be low.
a. True
b. False
Market systems can be evaluated as efficient or inefficient, but not as fair or unfair.
a. True
b. False
A country that must inhibit imports should give preference to
a. quotas over tariffs because quotas are less likely to distort trade patterns between
nations.
b. tariffs over quotas because, unlike quotas, tariffs offer no special benefits to
inefficient exporters.
c. export subsidies over quotas or tariffs because export subsidies can protect a nation’s
domestic producers.
d. an embargo wherever possible because an embargo can serve as a political weapon in
addition to being a “trade stopper.”
In long-run equilibrium, the perfectly competitive firm produces
a. where P = MC = AC.
b. at the lowest point on its long-run average cost curve.
c. where its long-run average cost curve is tangent to its horizontal demand curve.
d. All of the above are correct.
In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called
“uneconomic” coal mines owned by the government. The National Union of
Mineworkers protested, asserting that there was enough coal in the mines to continue
current levels of production for years. Thatcher implicitly argued that her decision was
economically sound because, at any practical level of output, for each “uneconomic”
mine,
a. MC > AC.
b. for every input, MPP > APP.
c. MC > MR.
d. AC > MC.
If a firm sells its output at a price greater than AVC, it will earn economic profit.
a. True
b. False
Marginal cost curves and average cost curves are both purely upward sloping.
a. True
b. False
Teenage employment in the United States has risen in the last two decades.
a. True
b. False
To maximize sales revenue, an oligopolist will expand output until the marginal
revenue curve cuts the horizontal axis.
a. True
b. False
Economic theory of market forms between pure monopoly and perfect competition was
largely nonexistent until the work of
a. Joan Robinson and Edward Chamberlin.
b. Adam Smith and David Ricardo.
c. Alfred Marshall and Francis Edgeworth.
d. Wassily Leontief and Joseph Schumpeter.
Critics argue that society is depleting its energy resources far too quickly. The most
likely explanation for this behavior is that
a. firms try to avoid making irreversible decisions about resource depletion.
b. investors expect interest rates to fall continuously in the future.
c. individuals tend to value their own well-being more highly than the well-being of
future generations.
d. people do not have what Pigou called a “defective telescopic faculty.”