Normative economics
A) is the focus of most modern economic reasoning.
B) answers the question “What ought to be?”
C) predicts the consequences of alternative actions.
D) answers the question “What is?”
Economic costs
A) include both a normal rate of return on investment and the opportunity cost of each
factor of production.
B) are equal to the direct costs of hiring all factors of production.
C) are the opportunity cost of each factor of production minus any interest charges paid
on borrowed funds.
D) are equal to total revenue minus accounting profit.
The four criteria that are frequently used in judging the outcome of economic policy are
A) efficiency, equity, stability, and economic growth.
B) efficiency, equality, stability, and economic growth.
C) efficiency, equality, profitability, and stability.
D) efficiency, equity, profitability, and stability.
The Coase theorem states that
A) the private sector will fail to produce the efficient amount of a public good because
of the free-rider problem.
B) under certain conditions, private parties can arrive at the efficient solution without
government involvement.
C) if there are external costs in production, the government must intervene in the
market to assure that the efficient level of output is produced.
D) public goods should be produced up to the point where the additional benefit
received by society equals the additional cost of producing the good.
Table 10.1
Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is
maximizing profits if he will hire ________ employee(s).
A) one
B) two
C) four
D) five
If the price of spinach decreases, there will be ________ of spinach enchiladas.
A) an increase in the supply
B) a decrease in the supply
C) an increase in the quantity supplied
D) a decrease in the quantity supplied
When making the decision to invest, the evaluation of the expected flow of future
productive services that the investment project being considered will yield is an
important consideration. This statement is accurate for
A) firms, but not for governments and households considering an investment project.
B) firms and governments, but not for households considering an investment project.
C) firms and households, but not for governments considering an investment project.
D) firms, households, and governments.
________ occurs when it is not possible to make some members of society better off
without making some other members of society worse off.
A) Pareto optimality
B) Partial equilibrium
C) General equilibrium
D) Market failure
Figure 6.5
Refer to Figure 6.5. Molly’s budget constraint is BD. If the price of CDs increases, her
new budget constraint becomes
A) AD.
B) BD.
C) CD.
D) EF.
Table 3.2
Refer to Table 3.2. This market will be in equilibrium if the quantity of cheeseburgers
demanded is
A)
B)
C)
D) 1,200.
Figure 16.1
Refer to Figure 16.1. The ________ amount of fertilizer is 50 bags.
A) efficient
B) unregulated
C) break-even
D) equitable
Hector has $1,000 a month to spend on clothing and food. The price of clothing is $50
and the price of food is $20. The clothing and food pairs in Hector’s choice set include
________ units of clothing and ________ units of food.
A) 50; 50
B) 20; 50
C) 15; 25
D) 8; 30
Figure 3.7
Refer to Figure 3.7. If pizza and burritos are substitutes, a decrease in the price of
burritos will cause a movement from Point B on demand curveD2 to
A) demand curve D1.
B) demand curve D3.
C) Point A on demand curve D2.
D) Point C on demand curve D2.
There is easy entry into the ________ and ________ industries.
A) perfectly competitive; monopolistically competitive
B) monopolistically competitive; oligopolistic
C) oligopolistic; monopolistic
D) monopolistic; perfectly competitive
In San Francisco there are many retail clothing stores. Each store is slightly different
from every other store. Retail clothing stores are an example of what market structure?
A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly
If the product derived from the last dollar spent on labor is less than the product derived
from the last dollar spent on capital, then the firm
A) is minimizing costs.
B) should use more labor and less capital to minimize costs.
C) should use less labor and more capital to minimize costs.
D) should increase the price paid to labor and decrease the price paid to capital to
minimize costs.
A gas tax holiday would
A) affect the market for gasoline.
B) affect the market for air travel.
C) affect the level of congestion on roads.
D) All of the above are correct.
Figure 3.7
Refer to Figure 3.7. Assume the market is initially at Point B and that pizza is a normal
good. An increase in income would cause the market to move from Point B on demand
curve D2 to
A) Point A on demand curve D2.
B) Point C on demand curve D2.
C) demand curve D1.
D) demand curve D3.
Table 8.3
Refer to Table 8.3. From the information in the given table,
A) the firm is in the long run.
B) the firm eventually experiences diminishing returns to its variable input.
C) the marginal cost curve intersects the average total cost curve between 3 and 4 units
of output.
D) the difference between total cost and total variable cost decreases as output
increases.
Firms will ________ a monopolistically competitive market until ________ are
eliminated.
A) enter; losses
B) enter; profits
C) exit; short run profits
D) exit; long run profits
Amy borrowed $40,000 from her parents to open a bagel shop. She pays her parents a
5% yearly return on the money they lent her. Her other yearly fixed costs equal
$18,000. Her variable costs equal $40,000. In her first year, Amy sold 40,000 dozen at a
price of $2.50 per dozen.
Amy’s profit is
A) $0.
B) $20,000.
C) $30,000.
D) $40,000.
Relating to the Economics in Practice on page 385: A study conducted by Mark
Duggan and Fiona Scott-Morton found that Medicare Part D
A) decreases pharmaceutical prices.
B) only slightly increased pharmaceutical prices.
C) had no impact on pharmaceutical prices.
D) increased pharmaceutical prices by more than 50%.
Table 3
Suppose output varies, ceteris paribus, with labor input in the manner displayed in the
table above. After how many units of labor do diminishing returns set in?
A) 3
B) 4
C) 5
D) They do not set in.
If P = MC and MC > ATC, then a perfectly competitive firm will earn ________ profits.
A) positive
B) zero
C) negative
D) break-even
A scientist wants to understand the relationship between automobile emissions and the
level of global warming. The scientist collects data on the volume of automobile
emissions and the levels of global warming over time. The scientist concludes that a 1%
increase in automobile emissions causes a 0.0003% increase in average global
temperatures. From this information he concludes that the automobile emissions are
harmful to the environment and should be reduced to stop the increase in global
temperatures.
The collection and use of the data on automobile emissions and global warming levels
is an example of
A) law and economics.
B) economic history.
C) econometrics.
D) empirical economics.
The Rare Bird Company has a monopoly in the sale of macaws in Iowa. When the Rare
Bird Company sells three macaws, its marginal revenue is $30. When the Rare Bird
Company sells four macaws, its marginal revenue will be
A) less than $30.
B) greater than $30.
C) equal to $30.
D) greater than $30 if demand is elastic and less than $30 if demand is inelastic.
Table 20.1
Refer to Table 20.1. For both countries to benefit from trade, the terms of trade must be
between ________ bushel(s) of oranges to bushel(s) of bananas.
A) 1:1/2 and 1:4
B) 2:3 and 2:1
C) 1:1 and 1:1/2
D) 1:1 and 1:2.
When a monopolist sells two units of output, its total revenue is $150. When it sells
three units of output, its total revenue is $180. When the monopolist sells three units of
output, the price per unit is
A) $50.
B) $60.
C) $75.
D) $90.
Equilibrium is the condition that exists
A) whenever there is no government intervention in the market.
B) when the demand curve intersects the price axis.
C) when quantity demanded equals quantity supplied.
D) when the demand curve intersects the quantity axis.
A Gini coefficient of zero means that ________.
A) the income is equally distributed
B) one person has all the income and everyone else has nothing
C) all the income is received by the top 20% of families
D) the income is split equally between the top 20% and the rest of the distribution