Fred Ramirez is a farmer who charts the relationship between number of acres planted
in corn and number of bushels of corn harvested. Which marginal concept can Fred
measure with this data?
a. marginal utility
b. marginal product
c. marginal cost
d. marginal revenue product
e. marginal factor cost
An increase in the price of butter, a substitute good, would be most likely to cause
a. a rightward shift of the demand curve for margarine
b. a leftward shift of the demand curve for margarine
c. the quantity of margarine demanded to increase
d. the quantity of margarine demanded to decrease
e. a decrease in the price of margarine
You own stock worth an estimated $1 million in the LPL corporation. In addition, you
have personal assets worth another $2 million. LPL becomes insolvent, with debts
exceeding assets by $15 million. Your personal wealth will decline by
a. $0
b. $1 million
c. $1.5 million
d. $3 million
e. your proportion of the total outstanding stock shares times $15 million
In a perfectly competitive industry we are likely to find
a. firms producing a wide variety of products
b. barriers to entry
c. no profit possible in the short run
d. firms that do not advertise
e. firms that can choose the price of their products
Suppose a firm finds it is better off operating than shutting down in the short run. What
is true at the quantity at which marginal cost equals marginal revenue?
a. total cost equals total revenue
b. average cost equals average revenue
c. profit is maximized
d. revenue is maximized
e. cost is minimized
“There should be less discrimination against the elderly.” This is an example of a
a. normative statement
b. positive statement
c. forecast
d. hypothesis
e. prediction
The movement of households from rural to urban settings reduced the degree of
specialization in household production.
a. True
b. False
The Coase solution to the problem of externalities
a. applies in every situation where externalities are present
b. only applies to activities that generate positive externalities
c. only works under perfect competition
d. only works when bargaining costs are low
e. can lead to an increase in the common pool problem
For a firm hiring a resource in a perfectly competitive resource market, its demand
curve for the resource is its
a. marginal product curve
b. marginal revenue product curve
c. marginal resource cost curve
d. marginal revenue curve
e. total revenue curve
When net unilateral transfers are added to the net exports of goods and services, the
result is called the
a. merchandise trade balance
b. official reserve transactions account
c. balance of payments
d. balance on capital account
e. balance on current account
With perfect price discrimination, the firm faces a constant marginal revenue.
a. True
b. False
The most likely reason why Los Angeles has so much smog is that residents
a. do not have strong, enforceable property rights to rapid transit
b. do not have strong, enforceable property rights to clean air
c. prefer dirty air to the inconvenience of rapid transit
d. prefer dirty air to the inconvenience of carpools
e. prefer dirty air to the inconvenience of eliminating smog
If the marginal product of an input is negative, the total product must also be negative.
a. True
b. False
Which of the following must be true of an attorney who buys a portable computer so
that she can work on trains and planes?
a. She is engaging in conspicuous consumption.
b. She gets utility from working.
c. She thinks the opportunity cost of her time is higher than it really is.
d. She thinks the opportunity cost of her time is lower than it really is.
e. She is trying to reduce the opportunity cost of traveling.
Exhibit 14-2
In Exhibit 14-2, the point I1 indicates
a. the optimal amount of information gathered
b. common knowledge
c. the opportunity cost of the consumer’s time
d. adverse selection
e. that all information is costly
The welfare loss of monopoly is also called
a. converted consumer surplus
b. deadweight loss
c. economic profit under monopoly
d. producer surplus
e. contestable profit
The United States is a major exporter of
a. diamonds
b. bauxite
c. coffee
d. corn
e. gold
The slope of a budget line with x on the vertical axis and y on the horizontal axis equals
a. (-income/Px) / (income/Py)
b. (income – Px) / (income – Py)
c. (income + Px) / (income + Py)
d. (Px – Py) / (Px + Py)
e. (Px + Py) / (Py – Px)
Rational choice by an individual implies
a. the use of some mathematical model when solving a problem
b. making decisions aimed at achieving some predetermined goal
c. that only monetary costs and benefits are weighed
d. that an individual will never regret any action taken
e. that scarcity can be eliminated for that individual
Exhibit 12-6
If the market represented in Exhibit 12-6 is allowed to operate freely, total employment
in the market will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
In calculating price elasticity of demand, which of the following is assumed to be
constant?
a. the price of the product itself
b. the quantity demanded of the product
c. total revenue received from the sale of the product
d. the prices of all other products
e. none of the above
Often trade will not occur because
a. transaction costs are too high
b. neither party has an opportunity cost
c. the benefits to one party just equal the losses to the other party
d. no one expects to gain from the trade
e. the profits of the firm are excessive
Some U.S. cities still dump raw sewage directly into rivers or oceans.
a. True
b. False
If the value of the Herfindahl index is 10,000, there must be exactly one firm in the
industry.
a. True
b. False
A good synonym for elasticity would be
a. stability
b. volatility
c. stickiness
d. demand
e. responsiveness
Perfectly competitive firms are price takers because
a. all small firms must take the price set by the largest firm in the market
b. firms take the price that government determines is a “fair” price
c. each firm is small and goods are perfect substitutes for one another
d. free entry and exit in the short run creates a constant market price in the long run
e. high barriers to entry force firms to compete by charging lower prices than other
firms in the industry
Exhibit 5-32
Refer to Exhibit 5-32. The tax burden borne by consumers is:
a. $50
b. $60
c. $70
d. $75
e. $80
Caleb teaches economics at Yucky State University and is paid $50,000 per year. He
also provides economic forecasts for local business for which he charges $100 per hour.
Which of the following is true?
a. all of Caleb’s income is salary
b. some of Caleb’s income is salary and some is personal interest
c. all of Caleb’s income is proprietor’s income
d. some of Caleb’s income is salary and some is proprietor’s income
e. all of Caleb’s income is personal interest
Suppose you go to a wedding reception that has free drinks. What is likely to be the
marginal utility of the last drink you had?
a. infinite
b. 0
c. 1
d. less than 0
e. greater than 1
To allow a public utility (which is a natural monopoly) to earn only a normal profit, the
government should
a. do all of the following
b. set price equal to average cost
c. equate marginal cost and average cost
d. set marginal cost equal to marginal revenue
e. set price equal to marginal cost
If the firms in a monopolistically competitive industry are suffering short-run losses,
which of the following will occur in the long run?
a. Some firms will enter the industry.
b. Customers of firms that leave the industry will switch to remaining firms.
c. Firms that remain in the industry will face reduced demand.
d. Firms will continue to incur losses.
e. There will be no excess capacity.