If the price of a resource falls, other things constant,
a. demand for the product it produces will increase
b. demand for a substitute product will increase
c. demand for a substitute resource will fall
d. supply of that resource will rise
e. supply of a substitute resource will also rise
Which of the following does not hinder successful price leadership?
a. all of the following are correct
b. potentially large economic profits due to this activity
c. cheating by offering secret discounts
d. product differentiation
e. illegality of coordinated pricing
Which of the following is not a function of government?
a. promotion of competition
b. stabilization to achieve the macroeconomic goals
c. redistribution of income through taxation and transfer payments
d. production of public goods
e. providing the economy’s private goods
Measurement of the official poverty level
a. includes all transfers
b. excludes all transfers
c. includes cash transfers but not in-kind transfers
d. includes in-kind transfers but not cash transfers
e. is always measured in real rather than nominal terms
Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost
$12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million,
and the vertical (robot) intercept is 5 million. If Manny Motors’ operating budget
became $120 million, the horizontal intercept would become
a. 6 million robot hours
b. 20 million robot hours
c. 6 million labor hours
d. 20 million labor hours
e. $120 million
Craft unions attempt to increase wages in their profession by
a. increasing labor demand
b. decreasing labor demand
c. decreasing labor supply
d. increasing labor supply
e. exclusive dealing contracts
Exhibit 18-1
Exhibit 18-1 shows five different Lorenz curves. Along the Lorenz curve labelled a, the
wealthiest 40% of the population earns what proportion of the total income income?
a. 20%
b. 40%
c. 60%
d. 80%
e. 100%
Because resources are not perfectly adaptable to the production of both good A and
good B,
a. the opportunity cost of A increases as production of A increases
b. the opportunity cost of A decreases as production of A increases
c. it is impossible for the economy to produce both A and B
d. the opportunity cost of A is constant
e. the opportunity cost of B is constant
In the following situation the tax system is
a. progressive through all levels of income
b. proportional throughout all levels of income
c. regressive throughout all levels of income
d. based on the benefits-received principle
e. there is insufficient information to answer the question
Exhibit 7-21
For the three isocost lines shown in Exhibit 7-21 which of the following is true:
a. the expenditure on inputs does not change as the isocost lines get farther from the
origin
b. the amount of output produced gets smaller the farther the isocost lines get from the
origin
c. the amount of output produced gets larger the farther the isocost lines get from the
origin
d. the expenditure on inputs required by the firm gets smaller the farther the isocost
lines get from the origin
e. the expenditure on inputs required by the firm gets larger the farther the isocost lines
get from the origin
The economic theory that states that as time passes, economic systems become much
more similar, with common rates of growth, common employment levels and common
rates of inflation is known as
a. divergence theory
b. parallel path theory
c. convergence theory
d. non-competing economic systems theory
e. static state theory
If the demand curve facing the Acme Awl Company is tangent to its average total cost
curve, all of the following statements are true except one. Which is the exception?
a. Economic profit is zero.
b. A normal profit exists.
c. Marginal cost must exceed marginal revenue.
d. Acme has excess capacity.
e. Firms have no incentive to enter or leave this industry.
According to the Census Bureau,
a. a greater percentage of families are below the poverty level now than in 1960
b. a smaller percentage of families are below the poverty level now than in 1960
c. the same percentage of families are below the poverty level now as in 1960
d. the percentage of families below the poverty level has fallen dramatically since 1970
e. 30 percent of families are below the poverty level
Exhibit 2-10
Refer to Exhibit 2-10. Which of the graphs best illustrates the impact on the production
possibilities frontier of a dramatic increase in the rate of immigration into a country?
a. a
b. b
c. c
d. d
e. b and c
The demand for most agricultural products tends to be
a. both price and income elastic
b. both price and income inelastic
c. price inelastic and income elastic
d. price elastic and income inelastic
e. unit elastic in terms of price elasticity and income elastic
If official U.S. poverty statistics included in-kind transfer payments,
a. the poverty rate would be close to zero
b. the poverty rate would be lower
c. the government deficit would be lower
d. the inflation rate would be higher
e. the top 10 percent of those in the income distribution would be wealthier
Saving is
a. helpful for production but not necessary
b. not useful for production because they imply a decrease in consumption
c. required for production
d. not useful for production because it is not a resource
e. not useful for production because savers must be paid interest
The solution in the prisoner’s dilemma is called the
a. loss minimizing solution
b. profit maximizing equilibrium
c. dominant-strategy equilibrium
d. revenue maximizing equilibrium
e. marginal revenue solution
All of the following are advantages of partnerships except one. Which is the exception?
a. they are relatively easy to start
b. their profits are taxed once as personal income
c. their liability is limited by each partner’s share of the business
d. a greater opportunity for specialization by the owners
e. a continuation of the firm if one partner dies
If Europe and the United States were the only two regions in the world, then U.S.
residents might desire to buy euros for all except one of the following reasons. Which is
the exception?
a. to invest in Europe
b. to buy European goods
c. to improve the U.S. balance of payments
d. to make loans in Europe
e. to buy European stocks
Poverty is
a. a relative concept
b. an absolute concept
c. more prevalent in North American countries than in other areas
d. an insufficient income level to purchase all necessities
e. the same in all countries
Most of the EPA Superfund expenditures have gone for court costs and legal fees.
a. True
b. False
In both monopolistic competition and non-price-discriminating monopoly,
a. the marginal revenue curve lies above the average revenue curve
b. the marginal revenue curve lies above the demand curve
c. the marginal revenue curve lies below the demand curve
d. marginal revenue is equal to average revenue
e. marginal revenue is equal to price
Which real-world market most closely approximates perfect competition?
a. the stock market
b. automobiles
c. higher education
d. cable television services
e. retail clothing stores
Which of the following is nottrue of monopolists?
a. The entry of new firms is not a major concern.
b. Monopolists seek to maximize profits.
c. Monopolists can charge any price they want and make a profit.
d. Monopolists can choose any point on the market demand curve.
e. Monopolists can raise price more than 10 percent.
Exhibit 16-3
At the price floor shown in Exhibit 16-3, which of the following output levels will be
produced?
a. i
b. j
c. k
d. l
e. m
A speculator in foreign exchange is a person who
a. buys foreign currency, hoping to profit by selling it at a higher exchange rate at some
later date
b. earns illegal profit by manipulating foreign exchange
c. causes differences in exchange rates in different geographic markets
d. simultaneously buys large amounts of a currency in one market and sells it in another
market
e. takes no risks in foreign currency exchanges
The location of production
a. shifted from factories to cottages during the Industrial Revolution
b. is no different today that during the Industrial Revolution, except that we use better
technology today
c. in the United States shifted from the West Coast to the East Coast as the country was
settled
d. shifted from cottages to factories during the Industrial Revolution, but now may be
shifting back to the home
e. is influenced more by land costs than by technological change
If there is a shortage in the market for jeans,
a. producers’ inventories will increase
b. the price should begin to rise
c. the demand curve will shift to restore equilibrium in the market
d. the supply curve will shift to restore equilibrium in the market
e. producers expect government to impose a price ceiling
Sam Edison obtains a patent on his new invention: trinoculars. In the long run,
a. he can earn only a normal profit
b. he may suffer an economic loss and stop producing
c. his monopoly power guarantees him a positive economic profit
d. he will achieve productive efficiency
e. he will achieve allocative efficiency
People who gain greater enjoyment from leisure activities
a. allocate more time to leisure
b. allocate more time to market work
c. allocate more time to nonmarket work
d. generally earn higher market wages
e. generally earn lower market wages