Figure 11-9
In Figure 11-9, which of the following is true?
a. MC = P
b. MC = MR
c. MU > MR
d. MU < MC
Zero economic profits for a perfectly competitive firm in the long run means
a. the firm must exit the industry.
b. the firm is in equilibrium.
c. the firm will shut down until the market improves.
d. average revenue is insufficient to cover long-run average cost.
A horizontal line always has a slope of one.
a. True
b. False
The theory of consumer choice is based on the hypothesis that each consumer wants to
a. maximize her total utility.
b. maximize her marginal utility.
c. minimize the rate at which her marginal utility diminishes.
d. minimize the percentage of her consumption diverted to inferior goods.
Opportunity cost cannot be measured in money terms, only in conceptual terms.
a. True
b. False
Environmental destruction is peculiar to centrally planned economies.
a. True
b. False
A monopolist’s profit per unit is shown by the difference between price and average cost
per unit.
a. True
b. False
When a corporation needs capital to expand, its choices are:
a. to sell stocks on a stock exchange
b. to sell bonds
c. to reinvest its own earnings
d. all of these
A recent decline in interest rates made home construction more affordable for many
families. The consequent increase in construction produced a rightward shift in the
demand curves for construction materials. Economists would say that the change in
demand for materials is due to
a. the principle of marginal productivity.
b. rent seeking.
c. diminishing marginal returns.
d. derived demand.
With a monopsony in the labor market, a union can often raise wages and the number of
workers hired.
a. True
b. False
The production possibilities frontier has a tendency to bow outward from the origin.
a. True
b. False
Which of the following is a source of income inequality?
a. differences in ability
b. differences in work intensity
c. risk taking
d. all of the above
There is only one efficient allocation of resources in an economy at one point in time.
a. True
b. False
Horizontal equity is a difficult concept to implement because
a. it is difficult to determine how unequally unequals should be treated.
b. it is difficult to measure ability to pay.
c. it is difficult to determine which people are equally situated.
d. people object to the use of absolute tax liability instead of percentage of income.
Unions can only achieve wage gains by sacrificing employment.
a. True
b. False
If the prices of both goods increase by 10 percent, the budget line
a. shifts to the right in parallel fashion.
b. shifts to the left in parallel fashion.
c. is unaffected since only relative price changes matter.
d. pivots on the axis of the more expensive good.
If both the supply and demand curves shift to the left, then we can conclude that there
will be
a. an increase in the equilibrium quantity sold.
b. a decrease in the equilibrium quantity sold.
c. an increase in the equilibrium price.
d. a decrease in the equilibrium price.
The differences between a competitive market and a monopoly include all of these
except:
a. excess profits would be competed away in a competitive market, but persist in a
monopolistic market
b. a competitive market would work toward production of the quantity consumers seek,
while a monopolistic market may restrict output to raise short term prices
c. a competitive market’s cost curves will shift with the market, while a monopoly’s cost
curves will remain stable
d. a competitive market would work toward production of the quantity consumers seek,
while a monopolistic market may restrict output to raise long term prices
If both a buyer and a seller have the same information, they are said to have symmetric
information.
a. True
b. False
A firm that decides to make a price cut assumes that marginal profit is negative.
a. True
b. False
The Justice Department and the Federal Trade Commission are likely to oppose mergers
a. that seem likely to increase efficiency.
b. that create a larger firm with economies of scale in a contestable market.
c. which will help one of the merging firms out of financial difficulties.
d. which threaten to reduce competition.
An individual with a diversified stock portfolio usually
a. holds only the stocks of conglomerates (firms that participate in many industries).
b. deals with several brokerage houses.
c. holds stock in several types of firms.
d. holds stocks with several maturity dates.
The following table contains information regarding price and output for a firm. For
each point except the first, calculate the elasticity between it and the point above.
Figure 14-5
Figure 14-5 contains a production possibilities frontier for wheat and milk production.
Explain why Point C is not a point where resources are being used efficiently.
A sum of money received at a future date is worth less than the same sum of money
received today. Why? Explain this with an example.
Discuss some of the reasons why monopoly power is considered undesirable.
One of the most controversial public policy issues in recent decades is the size and
growth of the U.S. budget deficit and public debt. Discuss where we are, compared to
other countries, and how we got here.
The estimated cost of automobile jobs saved due to limitations on foreign autos is
$105,000 per job. Why is there a cost to saving jobs through protectionism?
On balance, does market power promote or retard technological innovation?