If it takes 118 Japanese yen to buy one dollar, then how many dollars does it take to buy
one euro?
a. $0.0085
b. $1.18
c. $0.85
d. $0.01286
e. There is not enough information to answer the question.
Suppose farmers agree to reduce their supply of foodstuffs. The most likely reason they
would want to do this is they believe that less supply
a. means higher prices and higher total revenue.
b. means consumers will buy more of what they have to sell.
c. translates into higher-quality foodstuffs and that the higher the quality of the
foodstuffs they sell, the higher the prices for what they sell.
d. will get Congress to favor them with agriculture subsidies.
e. will get Congress to decrease their taxes.
A line is parallel to the vertical axis. The slope of the line is
a. zero.
b. infinite.
c. indicative of an inverse relationship between two variables.
d. indicative of a direct relationship between two variables.
e. b and d
If a market comes close to meeting (but does not perfectly meet) all the assumptions of
the theory of perfect competition, it follows that
a. the market is not perfectly competitive.
b. the theory of perfect competition still may be able to predict behavior in the market.
c. firms in the market cannot be price takers.
d. firms in the market do not try to maximize profit.
e. a and c
Economists Alchian and Demsetz suggest that firms are formed when
a. the sum of what individuals can produce alone is greater than what they can produce
as a team.
b. someone wants to earn profits.
c. someone comes up with the idea that customers will buy a new product.
d. the sum of what individuals can produce as a team is greater than the sum of what
they can produce alone.
Exhibit 39-8
Assume that E1 represents the initial equilibrium in the market for grain X. As a result
of a breakthrough in genetic engineering that develops an insect-resistant variety of
grain X,
a. the supply curve shifts leftward.
b. the equilibrium quantity increases.
c. the equilibrium price rises.
d. all of the above
e. a and c
In a divisive society the members of groups within the society see themselves as
a. working in harmony with other groups in the society.
b. equal to other groups within the society.
c. pitted against other groups in the society.
d. a and b
A demand curve is the graphical representation of the law of demand.
a. True
b. False
Exhibit 20-3
If price increases from $2.50 to $3.50, total revenue along the demand curve
a. increases to $67.50.
b. increases to $87.50.
c. remains at $87.50.
d. decreases to $67.50.
When the expected inflation rate is zero, then it follows that the
a. real interest rate is greater than the nominal interest rate.
b. demand for loanable funds is equal to the supply of loanable funds.
c. demand for loanable funds is greater than the supply of loanable funds.
d. real interest rate is less than the nominal interest rate.
e. none of the above
If supply is perfectly inelastic, it follows that a
a. rise in price will not change quantity supplied.
b. fall in price will not change quantity supplied.
c. rise in price will change quantity supplied by more than a fall in price.
d. fall in price will change quantity supplied by more than a rise in price.
e. a and b
A tax may be used as a corrective device in the case of a negative externality because it
will __________ marginal private costs and __________ supply.
a. increase; decrease
b. increase; increase
c. decrease; decrease
d. decrease; increase
Suppose you are eating slices of pizza and after consuming the first slice you receive 14
utils of total utility, after the second you receive 22 utils of total utility, and after the
third 25 utils of total utility. Then
a. the law of diminishing marginal utility is not applicable because your total utility is
increasing instead of diminishing.
b. your total utility is 61 utils.
c. your total utility is 25 utils, and the marginal utility of the first slice is 8 utils (22 –
14).
d. your total utility is 25 utils, and the marginal utility of the third slice is 3 utils.
Exhibit 26-1
Which of the following statements is false?
a. If marginal-cost pricing is imposed on the natural monopoly firm, the firm takes a
loss.
b. If average-cost pricing is imposed on the natural monopoly firm, the firm earns zero
economic profits.
c. If the natural monopoly firm produces Q3 units of output and charges P3 per unit, the
firm earns zero economic profits.
d. a and b
e. a, b, and c
In the case of a negative externality, the government can use a ________________ to
turn an inefficient outcome into an efficient one.In the case of a positive externality, the
government can use a ________________ to turn an inefficient outcome into an
efficient one.
a. tax; subsidy
b. subsidy; tax
c. tax; tax
d. subsidy; subsidy
The objective of speculators is to buy at one price and sell at a lower price.
a. True
b. False
Under a fixed exchange rate system, if the dollar price of a Mexican peso is below its
equilibrium level, the peso is said to be
a. depreciable.
b. undervalued.
c. overvalued.
d. appreciable.
e. none of the above
Exhibit 24-6
The price and quantity of a single-price monopolist producing good X are P0 and qB,
respectively. The marginal revenue curve is represented by
a. A.
b. B.
c. C.
d. D.