Which of the assumptions below assures us that economic profit will be zero in
long-run equilibrium for perfectly competitive firms?
a. buyers and sellers having all relevant information
b. firms producing heterogeneous goods
c. too few buyers
d. easy entry and exit
e. smallness of firms with respect to the market
Refer to Exhibit 34-1. The opportunity cost of one unit of Y in country B is
Exhibit 34-1
a. 0.5 units of X.
b. 1 unit of X.
c. 2 units of X.
d. 20 units of X.
The supply curve for space on a freeway is perfectly vertical at any given point in time.
a. True
b. False
If government regulators guarantee a natural monopolist that it will earn normal profits,
then the monopolist will
a. achieve resource-allocative efficiency.
b. charge a price above average total cost.
c. produce a quantity of output at which marginal revenue equals price.
d. none of the above
Refer to Situation 37-2.Both Dan and Ann realize that they are better off producing and
not stealing from each other than producing and stealing from each other.They agree
not to steal from each other.There is no enforcer of their agreement to not steal.It is
likely that
Situation 37-2Dan and Ann live in the same community and both can participate
in two activities, producing and stealing.
a. Dan and Ann are in a prisoner’s dilemma setting.
b. Dan is in a prisoner’s dilemma setting but Ann is not.
c. Ann is in a prisoner’s dilemma setting but Dan is not.
d. neither Dan nor Ann is in a prisoner’s dilemma setting.
If, at a particular wage rate in a competitive market, the quantity demanded of labor
exceeds the quantity supplied of labor, then
a. the supply curve will shift to the left, the demand curve will shift to the right, and the
surplus of labor will be eliminated.
b. since wages are so low, the quantity supplied of workers will decrease further, and
the quantity demanded will increase further.
c. some workers will begin to demand higher wages, as a result, employers will begin to
hire more workers.
d. the supply curve will shift to the right, the demand curve will shift to the left, and the
shortage of labor will be eliminated.
e. none of the above
When productivity increases in the production of agricultural products, the supply curve
for agricultural products shifts rightward.
a. True
b. False
Kristie currently spends her $1,000 a week income as follows: $500 on X, $300 on Y,
and $200 on Z.Her mother then gives her a $100 bill and tells her to use it to buy more
Z.Kristie actually takes the $100 her mother gave to her, adds $40 to the $200 she
usually spends on Z, and buys $240 worth of Z.Did Kristie’s mother’s $100 go to buy
only Z?
a. Yes, because Kristie used her mother’s actual $100 bill to buy Z.
b. No, because if it had, Kristie would have bought $300 worth of Z.Some of Kristie’s
mother’s money went for what Kristie had next on her list of desired purchases.
c. Yes, since Kristie bought $240 worth of Z, and the amount of money her mother gave
her is less than $240.
d. There is not enough information to answer the question.
Which of the following statements is true?
a. When a firm lowers the price of its product, total revenue always falls.
b. When a firm raises the price of its product, total revenue always rises.
c. When a firm raises the price of its product, total revenue always falls.
d. When a firm lowers the price of its product, total revenue always rises.
e. none of the above
If the supply of aisle seats equals the supply of middle seats on an airplane, and the
demand for aisle seats is _____________ than the demand for middle seats, then the
equilibrium price of aisle seats will be ______________ the equilibrium price of middle
seats.
a. greater; higher than
b. less; higher than
c. greater; lower than
d. less; the same as
If the coupon payment on a bond is $350 and the coupon rate is 7%, then what is the
face value of the bond?
a. $5,000
b. $374.50
c. $24.50
d. $528.57
e. There is not enough information provided to answer this question.
The demand curve for good X is a straight downward-sloping line. It follows that the
demand for good X is ________ elastic at __________ prices than at __________
prices.
a. less; lower; higher
b. more; lower; higher
c. more; higher; lower
d. less; higher; lower
e. a and c
The effect of a tariff is
a. an increase in consumers’ surplus.
b. a decrease in producers’ surplus.
c. an increase in tariff revenues for government.
d. b and c
e. all of the above
A measure of the value that one unit of a factor adds to the firm’s output is value
__________ product.
a. average
b. marginal
c. variable
d. fixed
Smith says that criminals are rational and that they consider both the benefits and costs
of criminal activity.Jones disagrees.He says criminals are irrational and can’t possibly
be considering both the benefits and costs of criminal activity.If they did, he argues,
they wouldn’t be criminals.An economist who wants to figure out if criminals are
rational, would most likely build a
a. falsifiable theory built on a rational criminal and then test the theory.
b. non-falsifiable theory built on a rational criminal and then test the theory.
c. falsifiable theory built on a rational criminal, but not test the theory.
d. non-falsifiable theory built on a rational criminal, but not test the theory.
Don receives 100 utils from consuming two oranges. The utility he derives from
consuming the second orange equals 30 utils. The information provided
a. is consistent with the law of diminishing marginal utility.
b. is inconsistent with the law of diminishing marginal utility.
c. is sufficient to determine the quantity of oranges Don will consume.
d. lends support to the inferiority of oranges as consumer goods.
A candidate who understands that in a two-person race the person closer to the center of
the voter distribution will win is likely to
a. first take polls to figure out what the voters are thinking and then afterward propose
policies that are consistent with the polls.
b. first put forth his or her views on a whole host of issues and then afterward take polls
to see if the majority of voters agree with him.
c. speak in specific terms about what needs to be done.
d. a and c
e. b and c
If the demand for cocaine is inelastic and people commit crimes to buy drugs, then a
drug bust can increase the amount of drug-related crime.
a. True
b. False
Refer to Exhibit 34-10.Who has the comparative advantage when it comes to mowing
lawns?
a. Danielle
b. Jason
c. neither Jason nor Danielle
d. both Danielle and Jason
The difference between artificial rents and real rents is that
a. artificial rents are contrived by government and real rents are not.
b. real rents are usually bigger than artificial rents.
c. artificial rents occur only if the supply curve for the good in question is perfectly
inelastic.
d. artificial rents are subject to rent seeking and real rents are not.
In a perfectly competitive market, firms face no barriers to entry or exit.
a. True
b. False
The ticket price of zero for the viewing of a television show taping often results in a
shortage of tickets which are frequently rationed on a first-come-first-served basis.
a. True
b. False
Evidence pertaining to the airline industry suggests that
a. since the airlines have become deregulated, airline fares have increased steadily.
b. under regulation the airlines’ fares were low, which indicates that the regulators were
doing a good job setting prices.
c. airline fares are no higher and no lower than they were when the industry was
regulated.
d. deregulation of the airline industry has brought significant price reductions.