Fixed prices in a free-market economy can increase efficiency.
a. True
b. False
Figure 18-1
According to the graph in Figure 18-1, tax collections will be which of the following?
a. 14 million
b. 1,4 million
c. 12 million
d. 1 million
Due to Pigou’s “defective telescopic faculty,” a market economy is inefficient in
allocating resources between the present and the future.
a. True
b. False
A ____ is a type of derivative in which the seller promises to pay the buyer of a
particular security the value of that security if it goes into default.
a. credit default swap
b. derivative
c. mortgage backed security
d. futures contract
Which of the following encourage(s) entrepreneurs to innovate?
a. the patent system
b. the enforcement of contracts by the courts
c. private property rights
d. All of the above are correct.
Economists believe that externalities can be cured by market methods.
a. True
b. False
Figure 11-7
The firm in Figure 11-7 is an unregulated monopolist; it will produce which of the
following?
a. 175 units at a price of 7
b. 100 units at a price of 6
c. 100 units at a price of 9
d. 150 units at a price of about 7.5
The law of demand states that as the price
a. increases, total quantity demanded will increase.
b. decreases, total quantity demanded will decrease.
c. increases, total quantity demanded will decrease.
d. increases, total quantity demanded will stay the same.
A typical economy produces thousands of different goods. Is it accurate to say that
society faces a production possibilities frontier?
a. No, because two dimensions cannot capture the complexity of a full economy.
b. No, although a graph with several thousand dimensions would be appropriate.
c. Yes, although society does not face opportunity cost and the model does not apply.
d. Yes, because scarcity always imposes opportunity costs.
e. Uncertain-economic theory has no answer to this question.
What is the opportunity cost of economic growth?
a. investment in the current time period
b. improved technology in the current time period
c. capital goods in the current time period
d. consumption in the current time period
If marginal cost of an additional unit of output is greater than average cost, then average
cost will rise.
a. True
b. False
Voluntarism in recycling garbage
a. generally has not been successful.
b. works only where there is surveillance.
c. increases the cost of recycling waste.
d. has worked best of all recycling program alternatives.
Figure 4-10
The rising minimum wage allegedly has reduced the quantity demanded of teenage
labor. However, demographics slightly reduced the supply of teenage labor. The U.S.
Department of Labor reported that teenage unemployment is an increasing problem.
Which graph in Figure 4-10 is consistent with these facts?
a. 1
b. 2
c. 3
d. 4
The host at a party offers Justin a sixth beer. Justin says, “No thanks, man. The marginal
utility of that fifth beer was, like, 20 cents, but the marginal utility of the sixth would be
minus 10 cents.” If Justin consumes the sixth beer, his total utility will
a. rise by 10 cents.
b. reach a plateau and remain constant.
c. fall by 10 cents.
d. fall below his marginal utility.
The federal government is most likely to oppose
a. the purchase of a firm in danger of bankruptcy by a successful firm.
b. a merger between two firms in a perfectly competitive industry.
c. the purchase of one oligopolist by another in an industry with contestable markets.
d. a merger between two firms in a three-firm industry.
Comparative advantage is illustrated by the slopes of production possibilities frontiers.
a. True
b. False
States rely primarily on income taxes as a source of revenue.
a. True
b. False
Pork can be used to produce bacon or sausage, but not both. If the price of bacon rises
for some reason, then, everything else equal,
a. the price of sausage will rise.
b. the price of sausage will fall.
c. the resources used in raising Pork will become more expensive.
d. the resources used in raising Pork will become less expensive.
Economists use the mechanism of supply and demand to study:
a. inflation
b. unemployment
c. environmental protection
d. both a and b
e. all of these
The average revenue curve can also be described as the demand curve.
a. True
b. False
An increase in demand will have what effect on equilibrium price and quantity?
a. Price will increase; quantity will decrease.
b. Price will decrease; quantity will increase.
c. Both price and quantity will increase.
d. Both price and quantity will decrease.
Productivity levels in rich countries are:
a. higher than in poor countries
b. lower than in poor countries
c. about the same as in poor countries
d. not related to those in poor countries
Recent studies suggest that a rise in the minimum wage results in a substantial cut in the
demand for teen labor.
a. True
b. False