People make mistakes in allocating their time
a. only when leisure time is an inferior good
b. because expectations are not always fulfilled
c. more often when the cost of making a mistake is high
d. only when economists remove the assumption that individuals are rational
e. because information is free and readily available
Along a downward-sloping linear demand curve,
a. slope is constant and elasticity is changing
b. slope is changing and elasticity is constant
c. both slope and elasticity are constant
d. both slope and elasticity are changing
e. no generalizations can be made about slope
Exhibit 8-3
Which point in Exhibit 8-3 indicates the quantity at which this firm will maximize
profit?
a. point a
b. point b
c. point c
d. point d
e. either point b or point d
If a company offers a consultant the following five alternatives, which should she
choose?
a. to be paid $50,000 now
b. to be paid $30,000 now and $20,000 when the project in question is completed
c. to be paid $25,000 now and $25,000 when the project in question is completed
d. to be paid $10,000 now and $40,000 when the project in question is completed
e. to be paid $50,000 when the project in question is completed
If the government intervenes in a labor dispute and requires settlement through binding
arbitration, what takes place?
a. A neutral third party makes a decision that both parties must accept.
b. A neutral third party makes a decision that both parties may reject.
c. One party sues the other in court.
d. The two parties negotiate an agreement without assistance and both must accept it.
e. The two parties negotiate an agreement with assistance from their attorneys and both
must accept it.
Exhibit 13-3
Exhibit 13-3 gives data on the number of tools a certain firm buys to use in its
production process. Assume that the tools are expected to last indefinitely, that
operating expenses are negligible, and that the price of the firm’s output is expected to
remain constant in the future. At an interest rate of 7 percent, the firm in Exhibit 13-3
should select
a. the maximum number of tools available because price does not decrease as output
increases
b. the minimum number of tools available because price does not increase as output
increases
c. three tools
d. four tools
e. five tools
The marginal revenue product curve slopes downward only if the firm is a price
searcher in the product market.
a. True
b. False
In Japan, recycling is prevalent and landfill use is small relative to the United States
because
a. the Japanese are more conscientious
b. there is no externality problem there
c. land is relatively more scarce in Japan
d. the Japanese have better recycling technology
e. littering is illegal there
Which characteristic of perfect competition ensures that economic profit will be zero in
the long run?
a. each firm’s output is small in relation to total market supply
b. buyers and sellers are fully informed about the price and availability of all resources
and products
c. the product is homogeneous
d. there is freedom of entry and exit in the market
e. firms are price takers
Which of the following best describes circumstances surrounding the breakdown of the
Bretton Woods system?
a. The United States was enjoying a persistent trade surplus.
b. There was too much dependence on the dollar because no other country had a stable
currency.
c. Germany, with its strong currency, refused to defend the dollar.
d. Speculators were betting on the fall of the dollar.
e. All the other nations basically wished their currencies to appreciate, which was
impossible under the system.
Social Security was established
a. in the 1930s to provide retirement income to those with a work history
b. in the 1930s to provide jobs for the unemployed
c. in the 1930s to provide health insurance
d. in the 1960s to provide retirement income to those with a work history
e. in the 1960s to provide health insurance
Which of the following is the best description of the risks of corporate bonds?
a. the firm declines to pay dividends
b. both bankruptcy and higher market interest rates
c. only bankruptcy
d. lower market interest rates
e. both the firm declines to pay dividends and higher market interest rates
Adam’s Apples, a small firm supplying apples in a perfectly competitive market,
decides to cut its production in half this year. As a result, the
a. market price will rise
b. market price will fall
c. market quantity will rise
d. market price will not be affected
e. total expenditures on apples will rise
Total cost is calculated as
a. average fixed cost plus average variable cost
b. fixed cost plus variable cost
c. the additional cost of the last unit produced
d. marginal cost plus variable cost
e. marginal cost plus fixed cost
An import quota is a
a. legal limit on the quantity of a good that can be imported per year
b. legal requirement that a specified percentage of a final good’s value must be
produced domestically
c. legal requirement that exports to a certain country must exceed a specified value
before that country’s product may be imported
d. percentage tax on an imported product
e. lump-sum tax on an imported product
What is always true at the quantity at which average total cost equals average revenue?
a. economic profit is zero
b. marginal cost equals marginal revenue
c. economic profit is maximized
d. revenue is maximized
e. cost is minimized
U.S. farm subsidies are a sticking point in negotiating freer international trade
agreements.
a. True
b. False
In the monopoly market structure, new firms
a. cannot profitably enter the industry, even in the long run
b. may freely enter and leave the industry in both the short run and the long run
c. may freely enter and leave the industry in the long run only
d. may freely enter and leave the industry in the short run only
e. have no incentive to enter the industry, even if economic profits are present
When a country establishes trade restrictions, domestic producers of goods that
compete with imported goods
a. always lose in the short run
b. always gain in the long run
c. may lose in the long run if protection stifles innovation and leaves the industry
vulnerable
d. may gain in the short run because wages will fall in that industry
e. usually lobby against such restrictions
The tit-for-tat strategy implies that the firms
a. in non-competitive industries match price increases but ignore price decreases
b. will follow the lead of the dominant firm in making pricing decisions
c. prices will change whenever fixed cost changes
d. cooperate on the first round, and then follow your competitors reactions on the
second round
e. price will only change if demand changes
Exhibit 11-7
In Exhibit 11-7, the marginal product of the third machine is
a. $3
b. 5
c. 15
d. 3
e. 2
In what three ways do people use their time?
a. market work, selling labor in the labor market, and leisure
b. producing their own goods and services, nonmarket work, and market work
c. nonwork, work, and leisure
d. market work, nonmarket work, and leisure
e. market work, nonwork, and leisure
Which of the following statements concerning utility is correct?
a. It is possible to precisely measure the utility an individual receives from consuming a
particular good or service
b. It is always possible to determine whether Dalene or Juloy gets more utility from
consuming two units of the same good
c. The utility of goods can be measured while the same is not true for services
d. Utility is a subjective measure of satisfaction an individual receives from consuming
a good or service
e. It is only useful if there is no scarcity
If a firm raises the price of its product, its total revenue will
a. always increase
b. increase only if demand is price inelastic
c. increase only if demand is price elastic
d. remain constant, regardless of price elasticity of demand
e. never increase
Restricting the supply of labor in order to increase the wage
a. is a tactic used by both craft and industrial unions
b. is a tactic more likely to be used by the American Medical Association (AMA) than
the United Auto Workers (UAW)
c. is a tactic more likely to be used by the UAW than the AMA
d. is a tactic used solely by professional groups such as lawyers
e. has less effect on the wage than direct negotiation does
When resource markets are free to adjust, temporary differentials will cause
a. b, c, and e to occur
b. the allocation of fewer resources to lower-paid uses
c. the equalization of payments for the same resource in different uses
d. no change in the allocation of resources
e. the allocation of more resources to higher-paid uses
Velcro is becoming more and more popular for a variety of uses, including as fasteners
for shoes. What should happen to the equilibrium price and quantity for shoelaces as a
result?
a. Both price and quantity should increase.
b. Both price and quantity should decrease.
c. Price should increase and quantity decrease.
d. Price should decrease and quantity increase.
e. Nothing.
Which of the following did not help account for the recent decline in the growth of
trash-to-energy plants?
a. a decline in energy prices
b. less favorable tax treatment
c. a decline in the amount of garbage per capita
d. the 1986 tax reform act
e. environmental concerns over sites for the plants
Which of the following include the four basic resources supplied by households?
a. natural resources, labor, intelligence, capital
b. money, labor, natural resources, entrepreneurial ability
c. intellectual ability, physical ability, money, natural resources
d. labor, capital, intelligence, entrepreneurial ability
e. labor, natural resources, entrepreneurial ability, capital
Other things equal, the wage rate will be higher in a job that requires close monitoring
by a supervisor since few individuals are eager to work in such an environment.
a. True
b. False
The entry of new firms into a competitive industry in the long run has the effect of
a. driving up long-run equilibrium price
b. eliminating economic profits
c. reducing equilibrium quantity
d. making the demand curve facing each firm more inelastic
e. shifting the cost curves for each firm by an amount equal to total cost divided by the
number of firms