According to utilitarian justice, the redistribution of income from the rich to the poor
causes
A) the rich to sacrifice a lot and the poor to gain a little.
B) the marginal utility of both the rich and the poor to increase.
C) the marginal utility of both the rich and the poor to decrease.
D) an increase in total utility because of the law of decreasing marginal utility.
Figure 13.7
Refer to Figure 13.7. The profit-maximizing price for the Memory Company’s high
school yearbook is
A) $0.
B) $9.
C) $16.
D) $20.
Which of the following statements is true?
A) In a free market system, the basic economic questions are answered with the help of
a central government plan or directive.
B) Individuals guided by selfish behavior will produce products and services that
generate the highest profits.
C) The basic coordinating mechanism in a free market system is quantity adjustments
toward equilibrium.
D) In a free market system, competition forces firms to adopt efficient production
techniques.
The ________ states that things with the greatest value in use frequently have little or
no value in exchange.
A) law of diminishing marginal utility
B) utility conundrum
C) diamond/water paradox
D) law of reverse exchange
Under perfect competition, firms produce the ________ level of output because price
equals marginal cost.
A) greatest
B) most costly
C) equitable
D) efficient
Figure 10.4
Refer to Figure 10.4. At a market wage rate of $15, firms will hire ________ units of
labor.
A) 175
B) 100
C) between 0 and 99
D) 0
If a country has a trade surplus of $60 billion, which of the following can be true?
A) The country’s exports are $180 billion, and its imports are $120 billion.
B) The country’s exports are $110 billion, and its imports are $190 billion.
C) The country’s exports are $120 billion, and its imports are $180 billion.
D) The country’s exports are $160 billion, and its imports are $60 billion.
The main advantage of trade between two countries is that
A) trade makes both countries more self-sufficient.
B) employment in both countries will increase.
C) both countries have consumption choices beyond their current resource and
production constraints.
D) trade will lead to a more equitable distribution of income in both countries.
Figure 3.11
Refer to Figure 3.11. Assume hamburgers and hot dogs are substitutes. An increase in
the price of hot dogs will cause a movement from
A) Point B to Point A.
B) Point F to Point G.
C) D2 to D1.
D) D1 to D2.
Table 20.2
Refer to Table 20.2. The most that China will be willing to pay for a motorcycle is
A) 1/30 of a tractor.
B) 1/20 of a tractor.
C) 1/10 of a tractor.
D) 1/5 of a tractor.
Figure 10.3
Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A.
Labor supply decreases from S0 to S1, if the firm does not change the amount of capital
it employs, the firm will move to Point ________ to maximize profits.
A) B
B) C
C) E
D) F
Demand determines ________ entirely when ________ is perfectly inelastic.
A) quantity; supply
B) price and quantity; supply
C) price; supply
D) price and quantity; demand
If Tie-Dyed T-Shirts is currently employing labor so that the wage is greater than the
marginal revenue product of labor, it must also be true that
A) total revenues would be less than total costs.
B) the wage is less than marginal cost.
C) the price of the product must be less than marginal cost.
D) the price of the product must be greater than marginal cost.
A theory of distributional justice that concludes that the social contract emerging from
the original position would call for an income distribution that would maximize the
well-being of the worst-off member of society is known as
A) utilitarian justice.
B) Rawlsian justice.
C) maxi-min justice.
D) relative justice.
Fred enjoys smoking cigars, but cigar smoke makes his wife, Wilma, feel ill. Use a
graph to show that Fred’s consumption of cigars will be inefficient if he ignores the
costs imposed on Wilma.
Adverse selection and moral hazard arise because of ________.
A) asymmetric information
B) selection problems
C) risk aversion
D) mechanism designs for dealing with informational problems
Figure 6.3
Refer to Figure 6.3. Molly’s budget constraint is AC. Molly can purchase
A) none of the points along AD.
B) all of the points along AB.
C) all of the points along BD.
D) none of the points along AC.
In long-run equilibrium for a monopolistically competitive firm, the firm’s ________
curve is just tangent to its average total cost curve.
A) supply
B) marginal cost
C) demand
D) marginal revenue
An increase in the productivity of a factor of production will
A) shift its marginal revenue product curve to the right.
B) shift its marginal revenue product curve to the left.
C) cause a firm to move down the marginal revenue product curve.
D) cause a firm to move up the marginal revenue product curve.
Which of the following does NOT constitute an act of “investment” as economists use
the term?
A) The city council authorizes the construction of a new fire station.
B) A retiree buys 50 shares of stock at $10 a share and then sells the stock at a profit for
$20 a share.
C) An accountant attends a seminar on changes in the federal tax code.
D) A department store increases its inventory of football jerseys before the Super Bowl.
You agree to lend ________ to a friend for a year at an annual interest rate of 10%. At
the end of the year your friend pays you $600 in interest.
A) $60
B) $660
C) $6,000
D) $6,600
The change in the price of a good leads to a change in ________, which leads to a
________.
A) quantity supplied; movement along a supply curve
B) quantity supplied; shift of the supply curve
C) supply; movement along a supply curve
D) supply; shift of the supply curve
The figure below shows the market for macaroni:
(a.) What is the equilibrium price and quantity?
(b.) At what price shown on the graph would there be an excess demand for macaroni?
What would be the size of this excess demand?
(c.) At what price shown on the graph would there be an excess supply of macaroni?
What would be the size of this excess supply?
If the marginal tax rate equals the average tax rate, the tax would be
A) proportional.
B) regressive.
C) progressive.
D) uniform.
Figure 3.14
Refer to Figure 3.14. A decrease in quantity supplied is represented by a movement
from
A) S2 to S3.
B) S2 to S1.
C) Point B to Point A along supply curve S2.
D) Point B to Point C along supply curve S2.
Developed nations account for about ________ of the world’s population, and are
estimated to consume three-quarters of the world’s output.
A) one-quarter
B) one-half
C) two-thirds
D) three-quarters
A country has a trade deficit when
A) its exports exceed its imports.
B) its exports equal its imports.
C) its exports are less than its imports.
D) government spending is greater than tax receipts.
Firms that are earning zero economic profits are
A) breaking even.
B) earning less than a normal rate of return.
C) shutting down in the short run.
D) shutting down in the long run.
Pareto optimality occurs when
A) the distribution of income is equal.
B) it is not possible to make some members of society better off without making at least
one other member of society worse off.
C) firms are forced to internalize the effects of all externalities.
D) it is possible to make one person better off without making someone else worse off.
Table 16.1
Refer to Table 16.1. The marginal damage costs imposed on society from processing
four tons of salt are
A) $2.50 per ton of salt.
B) $10 per ton of salt.
C) $12.50 per ton of salt.
D) indeterminate from this output.
Explain what a graph is and how it can be used.
Explain the underlying assumptions of the price leadership model. What conclusions
can be made about the price charged and the output produced in an industry that has a
dominant price leader?
Using the above table, evaluate whether this tax is proportional, regressive or
progressive. Show all work in arriving at your answer.
Refer to Scenario 1. If Ajax can borrow at an interest rate of 5%, which projects should
be considered? If Ajax can borrow at an interest rate of 11%, which projects should be
considered? What is the level of total investment if the interest rate is 10%?
Compare and contrast the relative elasticities that you are likely to find between
toothpicks and furniture. Explain your answer.
Discuss the Corn Laws and their purpose.
The price of pizza falls by 25 percent. If the elasticity of demand for pizza is equal to
“1.5, what will happen to the quantity of pizza demanded?
SCENARIO 1: Assume the following marginal product schedule for labor in the
production of crab pots. L measures labor input and K measures capital input. MPL =
250 – 25L + 5K
If the output price is $1 per crab pot, what is the firm’s demand for labor schedule? Use
Labor = 0, 2, 4, 6, 8, 10 in your solutions. How many workers will be hired if the wage
is $125 per worker? How many workers will be hired if the wage is $100 per worker?
How would a firm determine its optimal method of production?
Define expected value.
A firm purchasing labor in a competitive market has the following marginal revenue
product curve:
How many workers should the firm hire if the wage is $15? What if the wage falls to
$12? Explain.
Using the above table, evaluate whether this tax is proportional, regressive or
progressive. Show all work in arriving at your answer.
Why do mortgage companies begin to require larger down payments from their
borrowers when housing prices begin to fall?
What is meant by fixed cost? What kinds of things might be included in fixed cost?
Comment on the following statement: “The Coase theorem implies that the contending
parties will come to the efficient solution regardless of where rights are initially
assigned.”
A corporate executive makes the following statement ” “The company must keep hiring
more workers up to the point where the marginal productivity of the last worker we hire
is zero. This way we can maximize the total productivity of the firm.” Critically
evaluate this statement. Also comment on whether this is the correct objective function
for the firm.