Refer to Exhibit 39-7. Let E1 represent the initial equilibrium in the market for X.
Population growth combined with the widely publicized results of medical research
extolling the virtues of consuming X will, ceteris paribus, result in a new equilibrium at
Exhibit 39-7
a. E2.
b. E3.
c. E4.
d. E5.
e. E4 or E5, depending on the extent of income elasticity of demand.
Total utility is defined as the
a. change in marginal utility a person derives from the consumption of a good.
b. change in total utility a person derives from the consumption of a good divided by
the price of that good.
c. change in total utility a person derives from the consumption of a good divided by the
change in the consumption of that good.
d. sum of the amounts of satisfaction a person receives from consuming a good.
e. change in total utility a person derives from the consumption of a good.
If the price of good X falls and the demand for good X is inelastic, then the percentage
__________ in quantity demanded is __________ the percentage fall in price, and total
revenue __________.
a. fall; greater than; rises
b. rise; less than; rises
c. fall; equal to; remains constant
d. rise; less than; falls
e. fall; greater than; falls
The budget constraint cuts the horizontal axis at 12 units of good X and it cuts the
vertical axis at 20 units of good Y. If the price of good X is $20 and the price of good Y
is $12, then what does income equal?
a. $200
b. $240
c. $520
d. $280
e. There is not enough information to answer the question.
Resources are allocated efficiently when
a. the exchange value of the resources to demanders equals the opportunity cost of the
resources.
b. the marginal benefit to demanders of the resources in the goods they purchase is
equal to the marginal cost to suppliers of the resources they use in producing the goods.
c. firms produce the quantity of output at which price is equal to marginal cost.
d. a and b
e. a, b, and c
Some economists contend that the National Collegiate Athletic Association (NCAA)
imposes its rules and regulations to keep college sports nonprofessional and in
relatively high demand.
a. True
b. False
The answer is: “There is a net loss to society.” What is the question?
a. What causes the distributional effects to outweigh the aggregate effects?
b. What is an effect of a reduction in producers’ surplus?
c. What is an effect of consumers’ surplus?
d. What is the effect of a tariff instead of a quota?
e. none of the above
Government always makes individuals better off when it removes them from a
prisoner’s dilemma setting.
a. True
b. False
Refer to Exhibit 21-4.What value goes in blank (C)?
Exhibit 21-4
a. 25
b. 5
c. 14.5
d. 10
e. There is not enough information to answer this question.
Scarcity means
a. wants are greater than the limited resources available to satisfy these wants.
b. wants are less than the limited resources available to satisfy these wants.
c. resources are infinite.
d. wants are limited.
e. both c and d
Refer to Situation 4-1. An economist would have most likely predicted that once price
controls were abolished in the spring of 1974,
Situation 4-1
During the winter of 1973-74, a general system of wage and price controls (including a
price ceiling on gasoline) was in force in the United States. At the beginning of 1974,
some oil-producing countries imposed an oil embargo (a legal prohibition on
commerce) on the West. In the spring of 1974, price controls were abolished.
a. the price of gasoline would decline sharply.
b. the surplus of gasoline would go away.
c. the shortage of gasoline would go away.
d. the demand for gasoline would decrease.
e. both c and d
Which of the following statements is true?
a. A person who chooses to work at a job that pays $40,000 a year instead of a job that
pays $80,000 a year is considered (by economists) to be irrational.
b. The wage rate paid in one labor market can affect the supply of labor in another labor
market.
c. The wage rate paid in one labor market can affect (albeit indirectly) the wage rate
paid in another labor market.
d. The demand for every type of labor is always the same.
e. b and c
It is possible for the absolute price of a good to rise at the same time that the good’s
relative price is falling.
a. True
b. False
Refer to Exhibit 34-7.The world price of good X is $15.Under a policy of free trade,
U.S. consumers will import ___________ units of X from abroad.
Exhibit 34-7
a. 50
b. 45
c. 40
d. 30
In general, electric, gas, and water companies are examples of __________monopolies.
a. unregulated
b. patent
c. natural
d. government
If a market is contestable, then
a. a cartel will form in the industry.
b. economic profits are small or zero.
c. firms face a vertical demand curve.
d. there is a dominant firm in the market.
e. none of the above
If the demand for computer software rises as incomes rise, then computer software is a
(an)
a. inferior good
b. substitute (good) for computers
c. normal good
d. complement (good) for computers
e. c and d
Employers use screening mechanisms, such as GPA, because they lack complete
information about job applicants.
a. True
b. False
The need to make choices is most closely related to the economic concept of
a. opportunity cost.
b. efficiency.
c. inefficiency.
d. utility.
e. disutility.
A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers
fatalities per accident from 0.12 to 0.08 while raising the number of accidents per
period from 400,000 to any more than
a. 480,000.
b. 600,000.
c. 660,000.
d. 770,000.