The actions of speculators make the speculators better off, but they necessarily make
the rest of society worse off.
a. True
b. False
George is a gift giver and Roger is a gift recipient.George has Roger in his utility
function, but Roger does not have George in his utility function.Roger may try to get
George to __________________ George’s efficient number of gifts to (give).
a. give more gifts to him than
b. reduce the number of gifts he receives below
c. increase the number of gifts he receives beyond
d. a and b
e. a and c
A positive externality exists and government wants to apply a per-unit subsidy in order
to bring about the socially optimal output. Under what condition will the solution (of
the subsidy) be worse than the problem (the market failure)?
a. Under the condition that the subsidy is greater than the marginal external benefit
(associated with the positive externality).
b. Under the condition that the post-subsidy output is not farther away from the socially
optimal output than the pre-subsidy output is from the socially optimal output.
c. Under the condition that the post-subsidy output is farther away from the socially
optimal output than the pre-subsidy output is from the socially optimal output.
d. Under the condition that the subsidy is less than the marginal external benefit
(associated with the positive externality).
e. none of the above
Public choice deals exclusively with business decisions.
a. True
b. False
When an investor buys shares of stock, those stocks must be held for a specified period
of time before they can be sold.
a. True
b. False
As long as there are __________ costs, __________ profit will be greater than
__________ profit.
a. implicit; accounting; economic
b. explicit; accounting; economic
c. implicit; economic; accounting
d. explicit; economic; accounting
One of the roles of the monitor in a firm is to reduce shirking.
a. True
b. False
If a person who generates a negative externality incorporates into his or her private
cost-benefit calculations the effects that this externality will have on third parties, the
externality has been
a. substituted.
b. accommodated.
c. compounded.
d. internalized.
In a divisive society the members of groups within the society see themselves as
a. working in harmony with other groups in the society.
b. equal to other groups within the society.
c. pitted against other groups in the society.
d. a and b
Suppose an industry consists of five equal-sized firms. Two of the firms plan to merge.
The merger ______________ raise anti-trust concerns at the Justice Department given
that the Herfindahl index before the merger was _____________ and the merger would
cause the Herfindahl index to rise by __________.
a. would; between 1,000 and 1,800; more than 100
b. would; greater than 1,800; more than 100
c. would not; less than 1,000; less than 300
d. would not; between 1,000 and 1,800; less than 100
To resolve the diamond-water paradox, it is important to note that under most
circumstances,
a. the marginal utility of water is lower than the marginal utility of diamonds.
b. the marginal utilities of water and diamonds are about the same.
c. the marginal utility of water is higher than the marginal utility of diamonds.
d. the marginal utilities of water and diamonds are inversely related.
e. the marginal utilities of water and diamonds are directly related.
If countries 1 and 2 produce only two goods, A and B, and they have the same
opportunity cost for the production of good A (and thus good B), then
a. each country will specialize in the production of one good and engage in trade.
b. neither country will specialize in the production of a good, but both will engage in
trade.
c. one country will specialize in the production of a good, and both will engage in trade.
d. neither country will specialize in the production of a good, and there will be no
incentive for trade.
Refer to Exhibit 4-3. If price P1 is a price ceiling, then
Exhibit 4-3
a. the quantity exchanged is Q3.
b. there is a shortage in this market.
c. it is the highest price that can legally be charged in this market.
d. both b and c.
e. all of the above
Refer to Exhibit 27-3. The firm must be a
Exhibit 27-3
a. price taker in the product market.
b. price searcher in the product market.
c. price taker in the factor market.
d. price searcher in the factor market.
e. a and c
Research presented in the text shows that people are more likely to spend a larger
percentage of money received from the government when it is called a ‘œtax bonus’
than they would if it were called a ‘œtax rebate.’
a. True
b. False
If the relative price of one unit of good Y is 0.25 units of good Z, then it follows that the
absolute price of good Z can be __________ and the absolute price of good Y can be
__________.
a. $4,000; $2,000
b. $1,000; $2,000
c. $2,000; $1,000
d. a and c
e. none of the above
Lemon laws __________ the __________ problem in the used car market.
a. are meant to reduce; adverse selection
b. are meant to reduce; moral hazard
c. unintentionally worsen; adverse selection
d. unintentionally worsen; moral hazard
“Screening” is the process by which
a. wages tend to be equalized as workers move from one labor market to another.
b. firms calculate the point of MRP = MFC.
c. firms try to increase the probability of hiring good employees.
d. discrimination is claimed to be an “information problem.”
In order for good X to be a likely candidate for off shoring, it must be produced with
______________ labor intensity and be a relatively ________________ good.
a. low; light
b. low; heavy
c. high; heavy
d. high; light
If a good is a normal good, it cannot also be income inelastic.
a. True
b. False
A profit-maximizing monopsonist will pay a wage rate that is less than the marginal
factor cost.
a. True
b. False
Macroeconomics deals with issues involving large corporations, while microeconomics
exclusively deals with issues involving small businesses.
a. True
b. False