As the term “opportunity cost” is defined in the text, the opportunity cost of going to
college includes
a. both tuition and the value of the student’s time.
b. tuition but not the value of the student’s time, which is a cash cost.
c. the value of the student’s time but not tuition, which is a monetary cost.
d. neither tuition nor the value of the student’s time, since obtaining a college degree
makes one’s income higher in the future.
e. neither tuition nor the value of the student’s time, at least at subsidized state
universities.
Production costs for a given output will be minimized when the
a. budget line and the product indifference curve meet in the vertical axis.
b. budget line crosses the product indifference curve.
c. budget line begins to bend back on itself.
d. product indifference curve and the budget line are tangent.
Which of the following workers would be most likely to work fewer hours as a result of
a wage increase?
a. farm worker
b. surgeon
c. lifeguard
d. bartender
Stockholders normally obtain higher expected payments than bondholders because
a. they are required by law to obtain a higher return.
b. they face higher risk.
c. the profit share declared as stock dividends is not taxable.
d. they vote themselves higher returns.
Which of the following taxes is least likely to be shifted?
a. a federal excise tax on grapefruit
b. a sales tax on some foodstuffs
c. a personal income tax
d. a state tax on football tickets
If trade between two countries is voluntary, one can expect that
a. one country’s gain is necessarily the other’s loss.
b. one country will exploit the other one.
c. neither country really gains from trade.
d. the larger country will always gain at the expense of the smaller.
e. both countries expect to gain something.
The definition of cross elasticity of demand for two products X and Y is
a. percentage change in quantity of X demanded/percentage change in quantity of Y
demanded.
b. percentage change in price of Y/percentage change in quantity of X demanded.
c. percentage change in price of Y/percentage change in price of X.
d. percentage change in quantity of X demanded/percentage change in price of Y.
Prohibiting price increases in situations of true scarcity
a. prevents the market mechanism from reallocating resources more efficiently.
b. discourages production.
c. may lead to extreme shortages of vitally needed products.
d. All of the above are correct.
Serious environmental problems are
a. unique to industrial economies.
b. unique to Western economies.
c. unique to civilized economies (i.e., those in which people live mainly in cities).
d. None of the above is correct.
The removal in 1966 of the requirement that Catholics eat fish on Fridays was followed
by a 12,5 percent fall in prices of fresh fish. From this it can be deduced that the
a. demand curve for fish shifted to the left.
b. demand curve shifted to the right.
c. supply curve shifted to the left.
d. supply curve shifted to the right.
The assumption that firms attempt to maximize profits will yield good predictions even
if firms sometimes pursue other goals.
a. True
b. False
The strength of the competition faced by a company can profoundly affect its
a. pricing.
b. output decisions.
c. input decisions.
d. All of the above are correct.
A black market develops only when quantity demanded exceeds quantity supplied.
a. True
b. False
George Washington’s troops at Valley Forge were almost destroyed by price controls.
a. True
b. False
Externalities are benefits or damages conferred upon people who are directly involved
in an exchange of a good or service.
a. True
b. False
What determines the position and shape of a society’s production possibilities frontier?
a. the physical resources of that society
b. the skills of the workforce
c. the level of technology of the society
d. the amount of factories in the society
e. All of the above are correct.
Table 5-4
Table 5-4 shows the demand schedule for concert tickets for a particular consumer.
What will be this consumer’s surplus if the price of tickets is $50?
a. $200
b. $60
c. $260
d. $210
When marginal revenue product of an input is less than its price, the producers should
use less of the input.
a. True
b. False
Producers were accused of price gouging as the price of bottled water soared after
Hurricane Andrew. Consumers clamored for price controls to keep bottled water at
pre-Andrew levels. Use supply and demand analysis to graphically show the effect of
setting a price ceiling on bottled water after Hurricane Andrew at the pre-hurricane
equilibrium price. Use your graph to assist in explaining the likely unintended effects of
such a price control. Be sure that your graph is completely and correctly labeled.
Few bother to think about what makes Florida oranges show up daily in South Dakota
supermarkets, but the people of South Dakota are likely to think a great deal about this.
Why does someone take the time and energy to assure that oranges which are grown in
Florida move more than 1,000 miles before they appear on grocery shelves?
Hostile takeovers of corporations have been in the business news for some time now.
Several states have passed laws making it harder for out-of-state corporations to acquire
firms headquartered in their states. Several corporations have established “golden
parachutes” to give executives high payoffs in case of hostile takeover. What market
imperfection is likely to be worsened by these actions? Explain.
The total cost of producing one unit of output is $200; two units cost $300, three units
$450, and four units $800. Fixed cost is $50. Draw the associated total cost, average
cost, and marginal cost curves, placing total cost on one graph and marginal and
average cost on a second graph.
What are the four types of industry structures? Compare and contrast them with the
number of firms in the industry, whether firms produce homogeneous or heterogeneous
products, whether there are economic profits in long-run equilibrium, and how
frequently the model appears in the real world.
Explain how a large number of firms in the industry and product heterogeneity affect
the likelihood of cartel success.
Contrast the shapes of the supply curves for financial capital and land.