An unregulated market economy provides material wealth, but does not generate
effective control of environmental damage.
a. True
b. False
If marginal profit is zero, then average profit is at a maximum.
a. True
b. False
When beneficial externalities are present in a market, the actual output will be
a. greater than the optimal output.
b. smaller than the optimal output.
c. equal to the optimal output.
d. either smaller or greater than the optimal output.
A firm’s fixed cost
a. does not vary with output.
b. does not change between the short run and the long run.
c. is generally a higher percentage of its total cost at high output quantities than at low
output quantities.
d. All of the above are true.
Contestable markets improve the performance of imperfect markets with
a. government regulations.
b. the threat of entry.
c. advertising.
d. tacit collusion.
A monopolistically competitive firm
a. tries to differentiate its product from competitors’ products.
b. faces a perfectly elastic demand curve for its product.
c. has more monopoly power in the long run than does a perfectly competitive firm.
d. is always a retail establishment.
Adam Smith noted that people are adept at which of the following?
a. Confusing themselves if given the chance.
b. Proving the truth of “Murphy’s Law.”
c. Denying themselves for the sake of others.
d. Pursuing their own self-interest.
e. All of the above are correct.
Which of the following equations defines marginal revenue product?
a. MRP = P times Q.
b. MRP = total cost.
c. MRP = total revenue minus total cost.
d. MRP = MPP times price of the product.
Owners of buildings can expect to collect ____ economic rent in the long run.
a. much
b. marginal
c. a competitive
d. little or no
The most important indirect taxes in the United States are
a. federal and state income taxes.
b. inheritance taxes.
c. corporate profits taxes.
d. sales and property taxes.
Average physical product measures the increase in total output that results from a
one-unit increase in an input.
a. True
b. False
Death taxes, both state and federal, account for about _____ percent of total tax
revenue.
a. 1%
b. 2%
c. 3%
d. 10%
In a laissez-faire economy, the price system plays a key role in
a. selecting outputs.
b. selecting inputs.
c. distributing outputs.
d. All of the above are correct.
The quantity which a firm will supply in the short run
a. can be read from its average cost curve.
b. can be read from its average variable cost curve.
c. can be read from the firm’s marginal cost curve above average variable cost.
d. is always zero above minimum average variable cost.
Economic fluctuations are defined as
a. alternating periods of significant GDP growth and decline.
b. events only encountered in developing countries.
c. periods of stable economic growth.
d. alternating periods of unemployment falling above and below zero.
The demand curve for the perfectly competitive industry normally slopes downward,
unlike the perfect competitive firm. Why?
Explain the effect of a usury law.
How does the United States compare to other nations on a per capita scale as far as
government production and taxation?
We don’t need to draw separate curves for demand, average revenue, and marginal
revenue curves for a perfectly competitive firm. Why?
If Polaroid wanted damages against Kodak for infringing on its instant development
film process, and the courts found a high positive cross elasticity between purchases of
Polaroid instant film and 35mm regular film, would that have strengthened or weakened
Polaroid’s claim against Kodak?