The law of demand states that
a. quantity demanded is inversely related to price
b. quantity demanded is directly related to income
c. marginal utility is inversely related to quantity consumed
d. total revenue is directly related to price
e. demand curves are linear
In the long run in monopolistic competition, all economies of scale are exhausted.
a. True
b. False
The American Tire Company has been experiencing a steady loss of market over the
past 40 years due to imports of lower-priced tires. Which argument would American
Tire most likely present to Congress when it lobbies for trade restrictions?
a. infant industry argument
b. declining industry argument
c. national defense argument
d. antidumping argument
e. loss of domestic jobs
To the extent that special-interest groups engage in rent seeking, they
a. are guilty of tax evasion
b. tend to make the economy more efficient
c. support legislation transferring wealth to themselves only if the measure increases the
economy’s overall efficiency
d. shift resources from endeavors that create income to activities that simply transfer
income
e. tend to increase the economy’s total output of goods and services while redistributing
income
Exhibit 4-14
Refer to exhibit 4-14. A decrease in the price of baby formula would cause which of the
following to happen?
a. a movement from a to b on demand curve D1
b. demand shift from D1 to D2
c. movement from c to d on demand curve D2
d. demand shift from D2 to D1
e. either a or b
Flexible exchange rates are more volatile than floating ones.
a. True
b. False
Exhibit 11-3
In Exhibit 11-3, the 100th unit of the resource is earning a resource price of
a. $10, all of which is economic rent
b. $10, none of which is economic rent
c. $4, all of which is economic rent
d. $4, none of which is economic rent
e. $10, some of which is economic rent
Exhibit 16-2
Refer to Exhibit 16-2. How much more will consumers spend on wool because of the
$6 price support?
a. $500 million
b. $6 million
c. $40 million
d. $400 million
e. $90 million
In one week, Mohammed can knit 5 sweaters or bake 240 cookies. The opportunity cost
per sweater for Mohammed is
a. $240
b. 240 cookies
c. 48 sweaters
d. 1/48 of a cookie
e. 48 cookies
Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost
$12 per hour to operate. The horizontal (labor) intercept of Manny Motors’ isocost line
is 3 million, and the vertical (robot) intercept of the isocost line is 5 million. Manny
Motors’ operating budget must be
a. $4.5 million
b. $8 million
c. $60 million
d. $80 million
e. $120 million
When faced with a continual excess demand for foreign exchange, which of the
following options can the government choose to eliminate the disequilibrium situation?
a. increase the peg or devalue
b. engage in fiscal policy and raise the country’s income level
c. engage in monetary policy and lower interest rates
d. increase the inflation rate
e. decrease the peg or revalue
The underground economy refers to
a. all market activity that goes unreported to the government
b. all market activity that is not subject to government taxation
c. all illegal activity
d. transactions between U.S. citizens and foreign nationals
e. rent-seeking activities on the part of private citizens
Exhibit 5-12
Refer to Exhibit 5-12. What can be said of the price elasticity of demand for this good?
a. Demand is inelastic.
b. Demand is unit elastic.
c. Demand is elastic.
d. Demand is perfectly elastic.
e. Not enough information is given to determine elasticity.
Exhibit 12-9
In Exhibit 12-9, the labor supply and labor demand in a unionized labor market is
represented by the demand curve D0 and Supply curve S0. Which of the market
equilibria is the most likely outcome of a successful union campaign to get the public to
buy the products made by union labor?
a. a
b. b
c. c
d. d
e. either a or d
Exhibit 10-13
Consider Exhibit 10-13. If two firms each produced 500 units, the total cost of
supplying 1,000 units would be
a. $6
b. $4,000
c. $4
d. $3,000
e. $6,000
A monopolist maximizes total revenue at the quantity where marginal revenue equals
zero.
a. True
b. False
Suppose environmental groups pressure the local government to reduce the number of
pollution rights to be sold. Other things equal,
a. pollution would not be affected
b. the price of pollution rights would rise, and the amount of pollution would decrease
c. the price of pollution rights would fall, and the amount of pollution would decrease
d. the price of pollution rights would fall, and the amount of pollution would increase
e. the price of pollution rights would rise, and the amount of pollution would increase
An economic model
a. always has a mathematical foundation
b. can never be proven wrong
c. can be constructed for an individual economic unit but not for the economy as a
whole
d. is a simplification of the real world
e. can be constructed for the economy as a whole but not for an individual economic
unit
Suppose you want to buy a boat, but you know that interest paid on a boat loan is not
tax deductible. Therefore, you take out a home equity loan, the interest on which is still
tax deductible. This procedure is an example of
a. illegal tax avoidance
b. illegal tax evasion
c. legal tax avoidance
d. legal tax evasion
e. the answer cannot be determined from the information given
Featherbedding by unions is an attempt to
a. increase the demand for union labor
b. increase the demand for non-union labor
c. decrease the demand for union labor
d. increase the supply of union labor
e. increase the supply of non-union labor
For a person who owns and operates an automobile, insurance premiums are a
__________ and maintenance and repairs are a __________.
a. revenue; cost
b. fixed cost; fixed cost
c. variable cost; variable cost
d. variable cost; fixed cost
e. fixed cost; variable cost
If the minimum efficient scale in woodstove production is 100,000 units per year,
a. the average cost of producing 50,000 stoves is greater than the average cost of
producing 100,000
b. the average cost of producing 50,000 stoves is equal to the average cost of producing
100,000
c. the total cost of producing 50,000 stoves is greater than the total cost of producing
100,000
d. the firm should not produce more than 100,000 woodstoves
e. MC exceeds AC at 100,000 stoves
In the United States, what percentage of smog comes from automobiles?
a. 5 percent
b. 15 percent
c. 25 percent
d. 40 percent
e. 80 percent
Something is called a barrier to entry only if it makes entry into an industry absolutely
impossible.
a. True
b. False
An industrial union can obtain a wage higher than the competitive level
a. without any change in total employment
b. at the cost of a reduction in total employment
c. and achieve higher total employment as well
d. and achieve the same or higher total employment
e. thus increasing the quantity of labor demanded
Exhibit 9-7
In Exhibit 9-7, how much profit is the monopoly earning at the profit-maximizing
quantity?
a. $16
b. -$20
c. $32
d. $34
e. -$16
A physicians’ professional association supports legislation seeking higher quality
medical care. According to the special interest theory of regulation, who likely will
benefit most from this legislation?
a. Government, through decreased regulation of physician quality.
b. Patients, through reduced prices for medical care.
c. Physicians, through increased prices for medical care.
d. Hospitals, through decreased for physicians’ services.
e. Government, since higher quality health care is clearly in the public interest.
On average, about half the labor force in developing countries works in agriculture,
versus only about 3 percent in industrial market countries.
a. True
b. False
Increased saving today means
a. more consumption today and in the future
b. less consumption today and in the future
c. more consumption today and less in the future
d. less consumption today and more in the future
e. more income today, but the net effect of increased income on the balance between
consumption and saving cannot be determined in advance
Which of the following is an advantage of a sole proprietorship?
a. the ability to pool resources
b. limited liability
c. double tax exemption of the firm’s earnings
d. ease of organization
e. ease of raising funds
Exhibit 19-10
In Exhibit 19-10 the domestic demand for sugar is represented by D and the domestic
supply is represented by S and the world price of sugar is $.13 per pound with a
domestic tariff of $.02 per pound of sugar. This tariff will generate ________ in revenue
for the government.
a. $0
b. $5,000
c. $25,000
d. $50,000
e. $75,000
Exhibit 9-1
In Exhibit 9-1, the marginal revenue of the sixth unit is
a. $10
b. $60
c. $100
d. $40
e. -$40