Total industry sales are $750 million. The four largest firms have sales of $256 million,
$120 million, $78 million, and $42 million. The industry’s four-firm concentration ratio
is
a. 0.66.
b. 0.69.
c. 0.39.
d. 0.14.
The excludability versus nonexcludability issue is
a. relevant to the issue of market failure.
b. not relevant to the issue of market failure.
c. relevant to the free-rider problem.
d. a and c
e. b and c
Exhibit 20-2
The market for good X is initially in equilibrium at $5. The government then places a
per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium
price
a. rises from $5.00 to $6.25.
b. falls from $5.00 to $4.00.
c. remains constant at $5.00.
d. none of the above
Exhibit 28-7
The marginal factor cost of increasing employment from 20 to 30 workers
a. is $14.
b. is $8.
c. is $7.
d. is $120.
e. is $100.
If the marginal utility of a good is negative, then
a. consumers should buy less of it.
b. consumers will consume it only if it is free.
c. consumers should buy more of it to make its marginal utility positive.
d. the law of diminishing marginal utility is being violated.
The price of X was $10 in year 1 and $14 in year 2. Which of the following could be
the correct reason for the rise in price?
a. The demand for X was higher in year 2 than in year 1, ceteris paribus.
b. The supply of X was lower in year 2 than in year 1, ceteris paribus.
c. The demand was higher, and the supply was lower, in year 2 than in year 1.
d. a and b
e. a, b, and c
The Justice Department began using the Herfindahl index (rather than the four- and
eight-firm concentration ratios) in 1982.
a. True
b. False
If the demand curve for a good shifts leftward,
a. quantity demanded is less at each price.
b. quantity demanded remains constant at each price.
c. quantity demanded is greater at each price.
d. demand is greater at each price.
In the production possibilities framework, economic growth is depicted by the PPF
a. shifting leftward (toward the origin).
b. shifting rightward (away from the origin).
c. becoming a straight line rather than a bowed outward curve.
d. becoming bowed outward rather than a straight line.
Supply of a food item increases by more than the demand for the food item increases.
One thing for certain is that
a. the price of the food item rises.
b. income elasticity of demand is less than 0.
c. the supply curve is price inelastic.
d. real income falls as a result.
e. none of the above
A positive externality exists and government wants to apply a per-unit subsidy in order
to bring about the socially optimal output. Under what condition will the solution (of
the subsidy) be worse than the problem (the market failure)?
a. Under the condition that the subsidy is greater than the marginal external benefit
(associated with the positive externality).
b. Under the condition that the post-subsidy output is not farther away from the socially
optimal output than the pre-subsidy output is from the socially optimal output.
c. Under the condition that the post-subsidy output is farther away from the socially
optimal output than the pre-subsidy output is from the socially optimal output.
d. Under the condition that the subsidy is less than the marginal external benefit
(associated with the positive externality).
e. none of the above
Political candidates running for the same office tend to voice
a. the same views on how things should be accomplished so that one candidate does not
gain an advantage over the other.
b. the same views on how things should be accomplished, simply because there usually
is no difference between their views.
c. quite different views on how things should be accomplished so that voters will see
that one approach is better than another.
d. the same views on what things should be accomplished, but not speak specifically on
how things should be accomplished.
Exhibit 28-12
For each quantity of labor hired (after the first worker), marginal factor cost will be
a. less than the corresponding amount in column (2).
b. greater than the corresponding amount in column (2).
c. less than the corresponding amount in column (3).
d. greater than the corresponding amount in column (3).
e. b and d
Which of the following statements is false?
a. To an economist, the resource land includes natural resources such as minerals,
forests, water and unimproved land.
b. To an economist, the resource capital consists of unproduced goods that can be
turned into produced goods.
c. To an economist, the resource labor consists of the physical and mental talents people
contribute to the production process.
d. To an economist, the resource entrepreneurship refers to a particular talent that some
people have for organizing the resources of land, labor, and capital to produce goods,
seek new business opportunities, and develop new ways of doing things.
Which of the following statements is false?
a. The issuer of a bond is a borrower.
b. The person who buys a bond is a lender.
c. Interest earned on corporate bonds is exempt from federal income taxes.
d. The coupon rate on a bondis the percentage of the face value that the bondholder
receives annually until the bond matures.
If the average income per U.S. worker decreases while that of Japanese workers
remains unchanged, then the demand curve for Japanese yen will shift __________,
which will cause the equilibrium exchange rate of the dollar price per yen to
__________, which is the same thing as saying that the dollar will __________.
a. rightward; rise; appreciate
b. leftward; fall; appreciate
c. rightward; rise; depreciate
d. leftward; fall; depreciate
e. rightward; fall; depreciate
Municipal bonds
a. are issued by state and local governments.
b. pay interest that is fully taxable.
c. are issued by corporations.
d. are issued by the federal government.
The theory of contestable markets concludes that
a. a small number of firms in an industry is strong evidence that they will perform in a
noncompetitive way.
b. even if the number of sellers in an industry is small, profits can be zero in the
industry.
c. inefficient producers can survive in a contestable market.
d. a firm in a contestable market will sell at a price above marginal cost.
e. all of the above
Which of the following is an example of a network good?
a. Facebook
b. Microsoft Excel
c. Microsoft Word
d. all of the above