The use of pollution charges to reduce pollution confronts the problem of
a. free riders who avoid revealing benefits from abatement.
b. determining specific individual damages and appropriate charges associated with
pollutants.
c. necessarily lowering the price of the products.
d. requiring no agency to administer the tax.
The term ‘satisficing” for decision-making behavior by many firms was coined by
a. Milton Friedman.
b. Adam Smith.
c. Herbert Simon.
d. Alan Greenspan.
Under current federal antipoverty programs,
a. economic equality is promoted at the least possible cost in economic efficiency.
b. a family’s benefits do not depend on its earnings from work.
c. a family’s total income (cash and in-kind benefits) may actually fall if its earnings
from work rise.
d. families with children are entitled to no more assistance than families without
children.
The production possibilities frontier slopes downward and to the right because of
limited resources.
a. True
b. False
The substitution effect of a decrease in the wage rate would lead most people to
a. supply less labor and demand less leisure.
b. supply less labor and demand more leisure.
c. supply more labor and demand less leisure.
d. supply more labor and demand more leisure.
Spending on an education is considered an investment because it involves a sacrifice of
current income for higher expected future income.
a. True
b. False
Pay as you go financing for the Social Security System was abandoned in 1983.
a. True
b. False
The marginal productivity theory of distribution holds that
a. each factor is paid what it deserves.
b. the owner of each factor is paid the amount that the factor contributes to earnings.
c. each factor’s income depends on how hard it works.
d. each factor receives an equal share of the revenue from production.
Prices
a. solve the problem of distribution of products among consumers.
b. act as rationing devices.
c. under laissez faire produce an efficient allocation of resources.
d. do all of the above.
In the long run, a monopolistically competitive firm earns small economic profits.
a. True
b. False
A grocery store sells soup for $1,50 a can, or $2,50 for two cans. To a customer, the
marginal cost of buying the second can of soup is
a. $1
b. $1.25
c. $1.50
d. $2.50
The degree to which an economic system approaches a market economy depends on the
degree to which
a. economic choices are made through the free interaction of buyers and sellers in the
marketplace.
b. there are monopolies in the marketplace.
c. people have a high standard of living.
d. advanced technology is used.
An oligopoly is a market structure in which a few large firms dominate the sale of a
single product.
a. True
b. False
Figure 11-3
In Figure 11-3, one can tell from the graph that the monopolist will earn a positive
profit only if
a. the price exceeds $3.
b. the price exceeds $2.
c. output is less than 60 units.
d. One cannot tell from the information given.
Americans will benefit if China has enough purchasing power to enable its people to
buy American products.
a. True
b. False
Most loopholes in the income tax system
a. are more likely to be exploited by the wealthy.
b. make it more progressive.
c. were created by the tax reforms instituted in 1986.
d. do not affect the economic decisions of the people who benefit from them.
Moral hazard
a. makes a free market in insurance hard to operate.
b. is the tendency of insurance to encourage the source of risk.
c. tends to make the cost of insurance higher and the market for insurance less efficient.
d. All of the above are correct.
A relatively high wage is predicted to be enjoyed by workers where
a. the population is large relative to industrial activity.
b. the jobs are disagreeable or dangerous.
c. the jobs are pleasant and satisfying.
d. demand is weak and supply is high.
A monopsonist hires labor in a market with perfectly competitive supply. Whenever she
hires an additional worker,
a. she must reduce the wage paid to all workers already hired.
b. she will not change the wage paid to all workers already hired.
c. she must raise the wage paid to all workers already hired.
d. she may or may not choose to change the wage paid to all workers already hired.
If the poor cannot afford proper medical treatment, an economist, for reasons of
efficiency, would favor
a. giving the poor added income to spend as they see fit.
b. paying doctors bonuses to treat the poor.
c. paying the medical bills of the poor.
d. giving the poor “medical stamps.”
Innovation that improves machinery, power sources and other capital equipment will
increase the demand for labor in the short run.
a. True
b. False
Total profit = Total revenue − Total cost (including opportunity cost).
Total profit defined in this way is called
a. accounting profit.
b. economic profit.
c. absolute profit.
d. relative profit.