Minimum efficient scale refers to the
a. minimum size plant in any given industry.
b. minimum point on the short-run average total cost curve.
c. output level when economies of scale first set in.
d. output level when diseconomies of scale first set in.
e. lowest output level at which average total costs are minimized.
Given a positive externality, the marginal private benefit curve lies to the __________
of the demand curve, with the market output __________ the socially optimal output.
a. right; above
b. right; below
c. left; above
d. left; below
Economists use the word utility to describe the satisfaction one receives from a good.
a. True
b. False
Which of the following statements is true?
a. Ceteris paribus, the longer the term of a loan, the lower the interest rate.
b. The nominal interest rate is the interest rate adjusted for expected inflation.
c. Loans that cost more to process and administer will come with higher interest rates
than loans that cost less to process.
d. a and b
e. none of the above
All economists agree that to justify that market failure has occurred, it is sufficient to
have the market choose an inferior product over a superior product.
a. True
b. False
Which of the following statements is true?
a. The higher the labor cost-total cost ratio, the lower the elasticity of demand for labor.
b. The lower the labor cost-total cost ratio, the higher the elasticity of demand for labor.
c. The more substitutes for labor, the higher the elasticity of demand for labor.
d. The fewer substitutes for labor, the higher the elasticity of demand for labor.
e. b and c
When the actual Lorenz curve is as far away from the 45-degree line as possible, there
is
a. perfect income equality.
b. perfect income inequality.
c. a more equal distribution of income than before.
d. a less equal distribution of income than before.
The MU/P ratio for good X is greater than the MU/P ratio for good Y as a result of a fall
in the price of good X. To achieve consumer equilibrium, the consumer reallocates
dollars from the purchase of good Y to the purchase of good X. In the process, she
a. puts downward pressure on prices.
b. maximizes total utility.
c. acts according to the law of demand.
d. b and c
e. none of the above
If an asymmetry of information is removed and laborers’ preferences change against
employment, this will shift the equilibrium in the labor market to the
a. northwest.
b. northeast.
c. southwest.
d. southeast.
A person says, “Prices (for meals at restaurants, clothes, taxis, etc.) are high in Paris
because land rents are so high in Paris.” This person
a. confuses economic rent and pure economic rent.
b. confuses cause and effect.
c. believes that land rents are price determining, when in fact land rents are price
determined.
d. b and c
e. a and c
Which of the following is false?
a. It is impossible for a person to be uninformed on who is running for president, what
the candidates stand for, and on everything else connected with presidential politics and
still be rational.
b. Failure to vote in an election is not necessarily a sign of apathy.
c. Informed voters necessarily have a larger impact on elections than uninformed voters.
d. a and c
Constant returns to scale are said to exist when inputs are increased by some percentage
and output increases by a(n) __________ percentage, causing unit costs to __________.
a. greater; fall
b. smaller; fall
c. greater; rise
d. smaller; rise
e. equal; remain constant
The MU/P ratio for good X is greater than the MU/P ratio for good Y. To achieve
consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to
the purchase of good X. If the law of diminishing marginal utility holds, the marginal
utility of good X __________ and the marginal utility of good Y __________.
a. falls, rises
b. rises, falls
c. rises, stays constant
d. falls, stays constant
e. stays constant, rises
A put option is a contract
a. that gives the owner the right, but not the obligation, to buy shares of a stock at a
specified price within the time limits of the contract.
b. that gives the owner the right, but not the obligation, to sell shares of a stock at a
specified price within the time limits of the contract.
c. in which the seller agrees to provide a particular good to the buyer on a specified
future date at an agreed-upon price.
d. that gives the owner the right, but not the obligation, to buy or sell shares of a stock
at a specified price within the time limits of the contract.
Suppose you could quantify the amount of satisfaction you receive from consuming ice
cream in money terms. You might say, “I expect to get $3 worth of satisfaction from this
ice cream cone.” According to traditional economic theory, if the price of this ice cream
cone were $3.25, would you buy one?
a. Ye, since the marginal benefit from consuming the ice cream cone is greater than the
marginal cost.
b. Yes, since the marginal cost of consuming the ice cream cone is greater than the
marginal benefit.
c. No, since the marginal cost of consuming the ice cream cone is greater than the
marginal benefit.
d. No, since the marginal benefit from consuming the ice cream cone is greater than the
marginal cost.
In all cases, microeconomics deals with
a. what is.
b. what should be.
c. relatively small units in the economy.
d. the entire economy.