Figure 12-13
Suppose the prevailing price is P1 and the firm is currently producing its
loss-minimizing quantity. If the firm represented in the diagram continues to stay in
business, in the long-run equilibrium
A) it will reduce its output to Q0 and face a price of P0.
B) it will continue to produce Q1 but faces the higher price of P2.
C) it will expand its output to Q2 and face a price of P2.
D) it will expand its output to Q3 and face a price of P1.
Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost
of his decision?
A) 0 since he will no longer be earning a salary
B) depends on the “going rate” for stay-at-home dads
C) at least $60,000
D) the value he attributes to the joy of parenting
Table 9-14
The table above reports the nominal average hourly earnings in private industry and the
consumer price index for 1965 and 2010. The percentage change in real average
earnings from 1965 to 2010 equals
A) 2.0 percent.
B) 19.7 percent.
C) 24.5 percent.
D) 80.3 percent.
Competition forces firms to produce and sell products as long as the ________ to
consumers exceeds the ________ of production.
A) marginal benefit; marginal cost
B) marginal benefit; marginal benefit
C) marginal cost; marginal cost
D) marginal cost; marginal benefit
Figure 15-1
Which of the following statements about the firm depicted in the diagram is true?
A) The fact that this firm is a natural monopoly is shown by the continually declining
long-run average total cost as output rises.
B) The fact that this firm is a natural monopoly is shown by the continually declining
market demand curve as output rises.
C) The fact that this firm is a natural monopoly is shown by the continually declining
marginal revenue curve as output rises.
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost
lies below the long-run average total cost where the firm maximizes its profits.
If property rights are not well enforced, all of the following are likely to occur except
A) fewer goods and services will be produced.
B) economic efficiency will be reduced.
C) an economy will produce inside its production possibilities frontier.
D) a significant number of people will be willing to risk their funds by investing them
in local businesses.
The government purchases multiplier equals the change in ________ divided by the
change in ________.
A) government purchases; equilibrium real GDP
B) equilibrium real GDP; government purchases
C) government purchases; consumption spending
D) consumption spending; government purchases
In 1930, the U.S. government attempted to help domestic firms that were harmed by the
Great Depression by passing the Smoot-Hawley Tariff. In response to this tariff, other
countries ________ and international trade ________.
A) lowered their tariffs; thrived
B) raised their tariffs; collapsed
C) eliminated tariffs; began to grow outside of the United States
D) doubled their tariffs; became unrestricted
Figure 14-7
Uniguest, Inc. is a company that provides PCs with internet access and touch-sensitive
screens to hotels. Suppose the Hard Rock Hotel and Casino in Las Vegas informs
Uniguest that it is considering installing these systems in its hotel rooms. The Hard
Rock expects to be able to charge higher prices for these rooms if it installs Uniguest’s
systems in its rooms. The two companies begin bargaining over what price the Hard
Rock will pay Uniguest for its systems, and the decision tree shown above illustrates
this bargaining game. Note that the profit figures listed in the decision tree are
additional profits for the Hard Rock and total profits for Uniguest.
a. Suppose the Hard Rock offers Uniguest $1,200 per system. Will Uniguest accept or
reject this offer? Why?
b. Suppose the Hard Rock offers Uniguest $800 per system. Will Uniguest accept or
reject this offer? Why?
c. Suppose Uniguest attempts to obtain a favorable outcome from the bargaining by
telling the Hard Rock it will reject an $800-per-system offer. If the Hard Rock does not
believe the threat is credible, what will it do? Why? What will Uniguest do? Why?
d. Is there a sub-game perfect equilibrium in this situation? Explain.
If electric utilities continually reduce their emissions of sulfur dioxide
A) the utilities will eventually be forced to go out of business.
B) the marginal benefit of additional emissions will rise.
C) the marginal cost of further emissions will rise.
D) the total benefit of sulfur dioxide emissions will fall.
Is a monopolistically competitive firm productively efficient?
A) No, because it does not produce at minimum average total cost.
B) Yes, because it produces where marginal cost equals marginal revenue.
C) No, because price is greater than marginal cost.
D) Yes, because price equals average total cost.
Which of the following is part of the secondary market?
A) New York Stock Exchange
B) the over-the-counter market
C) NASDAQ
D) all of these
In comparison to a government that runs a balanced budget, when the government runs
a budget deficit,
A) the equilibrium interest rate will fall.
B) business investment will fall.
C) household savings will fall.
D) none of the above
Under which exchange rate system was a dollar redeemable for gold only if the dollar
was presented by a foreign central bank?
A) the gold standard
B) a managed float exchange rate system
C) the Bretton Woods System
D) a fiat system
Economists who believe the supply-side effects of tax cuts are small essentially believe
that
A) tax cuts mainly affect aggregate demand.
B) tax cuts mainly affect aggregate supply.
C) tax cuts will increase the quantity of labor supplied.
D) tax cuts will result in relatively small changes in the price level.
Figure 12-3
Suppose the prevailing price is P1 and the firm is currently producing its
loss-minimizing quantity. Identify the area that represents the loss.
A) P2deP1
B) P3cbP1
C) P3caP0
D) 0P1bQ1
Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is
considering setting up his business as a sole proprietorship. What is one advantage to
Jeremy of setting up his business as a sole proprietorship?
A) As a sole proprietor, Jeremy would face limited liability.
B) As a sole proprietor, Jeremy would have the ability to share risk with shareholders.
C) As a sole proprietor, Jeremy would have both ownership and control over the
business.
D) All of the above would be advantages of setting up his business as a sole
proprietorship.
In a small European country, it is estimated that a $10,000 increase in capital per hour
worked will increase real GDP per hour worked by $300. Based on this information,
what is the slope of the per-worker production function in this range?
A) 0.03
B) 3.3
C) 33.3
D) 333
If real GDP in a small country in 2012 is $8 billion and real GDP in the same country in
2013 is $8.3 billion, the growth rate of real GDP between 2012 and 2013
A) is 3.0%.
B) is 3.6%.
C) is 3.75%.
D) cannot be determined from the information given.