If a perfectly competitive firm shuts down in the short run, its total cost equals zero.
a. True
b. False
Exhibit 2-4
Point g in Exhibit 2-4 is efficient because
a. the only way to increase production of A is by decreasing production of B
b. the economy can increase production of both A and B from point b
c. it is impossible to move to any other point along the production possibilities frontier
d. it is impossible to move to any other point inside the production possibilities frontier
e. no other production possibilities frontier exists
The horizontal (labor) intercept of Manny Motors’ isocost line is 3 million, and the
vertical (robot) intercept is 5 million. Which of the following best describes what would
happen to the isocost line if the price of robot hours increased?
a. It would shift to the right.
b. It would rotate outward along the horizontal axis.
c. It would rotate inward along the horizontal axis.
d. It would rotate outward along the vertical axis.
e. It would rotate inward along the vertical axis.
Marginal resource cost is defined as the
a. total cost of producing a unit
b. total cost of adding one more unit of a resource, other things constant
c. cost of adding one more unit of a resource, other things constant
d. marginal cost divided by the quantity of a resource
e. price of labor
The primary source of revenue for local governments is the property tax.
a. True
b. False
Exhibit 9-10
Maximum profit for the profit-maximizing monopolist in Exhibit 9-10, which does not
price discriminate, is
a. $14
b. -$8
c. $0
d. $46.62
e. $54
The balance of goods and services is
a. the same as the merchandise trade balance, since services cannot be traded
b. equivalent to the trade balance
c. the value of all goods and services exported minus the value of all goods and services
imported
d. the value of all tangible products exported minus the value of all tangible products
imported
e. the value of all tangible products exported minus the value of all tangible products
imported, and transactions to finance the difference
At output level a in Exhibit 8-6
a. a loss would be incurred
b. positive economic profit would be earned
c. economic profit would be zero
d. economic profit would be smaller than at point e
e. the firm cannot cover its fixed cost
Exhibit 17-6
In Exhibit 17-6, the socially efficient production level is
a. 0 units
b. 10 units
c. 20 units
d. 40 units
e. 50 units
According to research by William Shepherd, competition has increased in U.S.
industries since World War II due to
a. both c and d
b. all of the following
c. international trade
d. deregulation
e. antitrust activity
According to current Justice Department guidelines, mergers in an industry are seldom
challenged if the industry
a. would have a postmerger Herfindahl index greater than 1,800
b. would have a postmerger Herfindahl index less than 1,000
c. has a premerger Herfindahl index greater than 1,800
d. has a premerger Herfindahl index less than 1,000
e. has a premerger Herfindahl index equal to 10,000
The slope of the demand curve for a normal good must be positive.
a. True
b. False
The introduction of telecommuting, whereby people work at home and connect to their
employers’ offices via the Internet,
a. was mandated by the government
b. was made possible by technological advances
c. was encouraged by higher fuel costs
d. was a consequence of corporate downsizing
e. has been strenuously resisted by most workers
U.S. manufacturers formed trusts in the late 1880s because
a. booms in the economy made trusts highly profitable and allowed them to expand
b. economies of scale allowed larger firms to prosper
c. the rapid growth of the railroads allowed firms to reach a wider market
d. technological breakthroughs increased capital use and optimal firm size
e. they wanted to avoid price wars during depressions
Excess capacity typically occurs
a. in the short run in perfect competition
b. in the short run in monopolistic competition
c. in long-run equilibrium in perfect competition
d. in long-run equilibrium in monopolistic competition
e. usually in markets experiencing an increase in demand
If pretzels are a normal good, the income effect of a price change means that
a. as income increases, the quantity demanded increases along the demand curve for
pretzels
b. as income increases, the demand curve for pretzels shifts rightward
c. as income increases, the demand curve for pretzels shifts leftward
d. as the price of pretzels increases, the real income of individuals who demand pretzels
decreases, so the quantity demanded of pretzels decreases
e. as the price of pretzels increases, income increases
Which of the following is an example of a positive statement?
a. Workers with families should be paid at least the minimum wage.
b. If crime rates were reduced, the world would be a better place in which to live.
c. Marginal tax rates should be reduced for individuals in the highest tax brackets.
d. An increase in the price of gasoline will cause a reduction in the amount purchased.
e. Corrupt politicians ought to be voted out of office.
Income assistance benefits are
a. taxed at a high marginal rate, in the sense that benefits sharply decrease as earned
income increases
b. taxed at a 20 percent marginal rate
c. taxed at a high marginal rate in order to provide work incentives
d. unaffected by increases in earned income
e. positively related to income from other sources
In a circular-flow model, households supply all of the following except
a. labor
b. goods and services
c. capital
d. entrepreneurial ability
e. natural resources
If you are receiving $2,000 per year forever, the present value of that income stream
when the prevailing interest rate is 7 percent is equal to
a. $20,000
b. $62,472
c. $100,087
d. $27,000
e. $28,571
Which of the following is an example of capital?
a. pizza ovens
b. bulldozers
c. a college education
d. carpentry skills
e. all of the above
An economic model will produce poor predictions if it includes unrealistic assumptions.
a. True
b. False
Along a linear demand curve, as the price increases from zero,
a. demand decreases
b. demand increases
c. quantity demanded increases
d. total revenue first increases but eventually decreases
e. total revenue first decreases but eventually increases
For a monopolist,
a. marginal revenue and price are constant as quantity increases
b. marginal revenue falls but price is constant as quantity increases
c. marginal revenue is constant but price falls as quantity increases
d. both marginal revenue and price fall as quantity increases, but price falls faster
e. both marginal revenue and price fall as quantity increases, but marginal revenue falls
faster
Exhibit 2-3
Given the information in Exhibit 2-3, which product should Friday (an individual)
make?
a. fishhooks because he can make 30 more per day than Crusoe but only 8 more fishing
poles
b. both because he is better at both
c. fishing poles because that is where his comparative advantage lies
d. neither because Crusoe is better at both
e. we cannot tell from the given information
If a private market determines the quantity of smallpox vaccinations, which of the
following is true?
a. The equilibrium quantity is too low for efficiency.
b. The equilibrium price and quantity are too high for efficiency.
c. The equilibrium price is efficient.
d. The equilibrium quantity is too high for efficiency.
e. The equilibrium price and quantity are efficient.
The mixed economy is the dominant economic system in the world because
a. custom and religion have no influence on economic decisions in these systems
b. pure capitalist economies have placed more control in the hands of individuals in
recent years
c. there is public (i.e., governmental) ownership of resources but regulation of
government by individuals reduces some of the flaws of pure capitalism
d. there is private ownership of property but government regulation of individuals
reduces some of the flaws of pure capitalism
e. governments in pure command economies have increased their control over
decision-making in recent years
If a good is inferior, then the income elasticity of demand for that good is
a. positive and greater than 1
b. negative
c. positive and less than 1
d. 0
e. perfectly elastic
Irving R. Associates is granted a patent for a new product for which there are no close
substitutes. Which of the following must be true at the profit-maximizing quantity?
a. Price is equal to marginal cost.
b. Average revenue is equal to marginal cost.
c. Marginal revenue is positive.
d. Marginal revenue is less than marginal cost.
e. Price is greater than average revenue.
Exhibit 5-16
Between points a and b in Exhibit 5-16, the demand curve is
a. relatively inelastic
b. perfectly inelastic
c. unit elastic
d. perfectly elastic
e. relatively elastic
Exhibit 11-6
In Exhibit 11-6, total earnings by the resource in equilibrium is represented by area
a. 0deh
b. bed
c. dcf
d. 0cfg
e. bed + 0deh
To derive a demand curve using utility analysis,
a. change a consumer’s marginal utilities and note the effect of demand curve changes
on market prices
b. change a consumer’s marginal utilities and note the effect of supply curve changes on
market prices
c. change a consumer’s marginal utilities and note the effect of supply and demand
curve changes on market prices
d. note how the consumer’s utility-maximizing consumption bundle changes in response
to price changes
e. note how the consumer’s utility-maximizing consumption bundle changes in response
to demand-curve shifts
Successful management of resource wealth is a poverty trap
a. True
b. False
Exhibit 8-12
If the market price rises, the profit maximizing level of output in Exhibit 8-12 will
a. decrease
b. stay the same
c. increase
d. either stay the same or increase
e. either stay the same or decrease