The terms “correlation” and “causation” are synonymous.
a. True
b. False
The subject of borrowing by the U.S. from its citizens and from other countries, has
resulted in one of the fiercest policy debates in recent years.
a. True
b. False
Whenever average cost exceeds marginal cost,
a. average cost is rising.
b. average cost is falling.
c. marginal cost is rising.
d. marginal cost is falling.
Higher production indifference curves correspond to larger amounts of one input in
relation to a second input.
a. True
b. False
The difference between slope and elasticity is that slope measures absolute change and
elasticity measures percentage change.
a. True
b. False
The difference in values between money today and money in the future is lower when
the rate of interest is higher.
a. True
b. False
When GM advertises its cars, the company is trying to cause a
a. rightward shift in the supply.
b. rightward shift in the demand.
c. leftward shift in the supply.
d. leftward shift in the demand.
Technological advances that allow a good to be produced at a lower cost will shift the
demand curve rightward.
a. True
b. False
Unions often have the power to push wages above competitive levels.
a. True
b. False
For a monopoly, MC = MR < P so that MC < MU.
a. True
b. False
The achievement of greater efficiency in the United States has been at the expense of
growing inequality.
a. True
b. False
Quebec is capable of producing 10,000 pallets of wood shingles or 8,000 barrels of
maple syrup. Vermont is capable of producing 12,000 pallets of wood shingles or
12,000 barrels of maple syrup.
a. Graph these production possibilities curves. Indicate from the slope, which has the
absolute advantage, which the comparative advantage, and whether there are gains from
trade.
b. Assume that Vermont and Quebec each specializes in the good in which they have a
comparative advantage. Suppose that Vermont and Quebec decide to trade 5,000 pallets
of shingles for 5,000 barrels of syrup. Indicate this on the graph. How does this affect
the well being of the two societies? Explain.
If the elasticity of demand for cigarettes is 0,4, then an increase in the price of a pack of
cigarettes from $5,00 to $6,00 would reduce quantities demanded by about
a. 7 percent.
b. 40 percent.
c. 42 percent.
d. 220 percent.
A perfectly competitive firm can maximize profits by producing the quantity at which
MR exceeds MC by the greatest amount.
a. True
b. False
In long-run equilibrium in perfect competition, every firm is producing at minimum
average cost.
a. True
b. False
If orange juice prices double next year, there will be a
a. rightward shift in the demand for grapefruit juice.
b. rightward shift in the supply of grapefruit juice.
c. leftward shift in the supply of grapefruit juice.
d. leftward shift in the demand for grapefruit juice.
Theoretically, the price of a field hand on the New Orleans slave market would have
a. varied directly with the price of cotton.
b. risen as interest rates fell.
c. risen when the importation of slaves became illegal.
d. All of the above are true.
A tariff affects imports
a. by limiting quantity and raising price to a higher level.
b. by reducing quantity demanded so that supply falls.
c. by increasing supply, raising price, and reducing demand.
d. by raising price and reducing quantity demanded.
Graphs are useful because of the way they
a. facilitate interpretation and analysis of data.
b. clarify interpretation and analysis of ideas.
c. permit a person to easily see relationships.
d. convey an idea that might otherwise take many words.
e. All of the above are correct.
If a nation does not have an absolute advantage in producing anything, it
a. has no comparative advantage either.
b. will have a comparative advantage in the activity in which it is least inefficient.
c. will try to get along without trade.
d. will export raw materials and import finished products.
At a firm’s profit-maximizing level of output, its price is $200 and its short-run average
total cost is $225 The firm
a. has a profit of $25 per unit of output.
b. should shut down if its short-run average fixed cost is less than $25
c. has a loss of $100 per unit of output.
d. should shut down if its short-run average variable cost exceeds $25