The socialist countries of Eastern Europe have
a. fewer environmental problems than capitalist countries.
b. improved their environment more than the capitalist countries.
c. worse environmental problems than capitalist countries.
d. worsened since the collapse of communism there.
Equilibrium in a market is
a. a situation in which there are no inherent forces that produce change.
b. the natural state of affairs in the market.
c. the actual price and quantity that will exist in a market.
d. the best price and quantity that can exist in a market.
e. All of the above are correct.
In highly contestable markets, increases in concentration will enhance market power.
a. True
b. False
The marginal utility of a unit of good Y to Jane is
a. the additional utility that Jane gets from consuming one more unit of Y.
b. defined in money terms as the minimum amount Jane is willing to pay for that
additional unit of Y.
c. defined in money terms as the maximum amount Jane is willing to pay for all the Y
she buys except that additional unit.
d. All of the above are correct.
The main difference between direct and indirect taxes is that
a. indirect taxes are automatically deducted from workers’ paychecks and direct taxes
are not.
b. direct taxes are paid to state and local governments and indirect taxes are paid to the
federal government.
c. direct taxes are taxes levied on people and indirect taxes are taxes levied on activities
undertaken by people.
d. direct taxes are usually proportional and indirect taxes are usually progressive.
Being a monopolist in the market
a. guarantees a positive short-run profit.
b. guarantees a positive long-run profit.
c. does not contradict with the rule that profit is maximized where MR = MC.
d. All of the above are correct.
Standby passengers on airlines who pay low rates for seats benefit from the low price.
How are the airlines affected?
a. They lose, because the standby passengers do not cover the full cost of the seats.
b. They gain, because the additional revenue covers the “fixed costs” of the flight.
c. They lose, because the gain of the passengers must necessarily come at the expense
of the airline.
d. They benefit as long as the additional revenue from the passengers exceeds the
marginal cost.
e. Uncertain, because economic theory says nothing about this sort of situation.
It is true of externalities that they
a. arise when all costs, social and private, are included in production cost.
b. are always beneficial.
c. are always detrimental.
d. None of the above are correct.
The worst and most difficult to extract resources are used first.
a. True
b. False
Suppose that the government imposes an excise tax on widgets. The portion of the tax
borne by the buyer of widgets depends upon
a. elasticity of demand.
b. income of buyers.
c. size of the tax that is imposed.
d. cross elasticity of demand between widgets and floogles.
Table 3-2
Combination Cotton Corn
A 12 16
B 17 15
C 21 13
D 23 9
E 24 5
In Table 3-2, from point C, the opportunity cost of 3 more units of cotton would be
a. 4 units of corn.
b. 8 units of corn.
c. 14 units of corn.
d. 16 units of corn.
American unions came under increasing pressure in the 1950s because of stronger
competition both at home and abroad.
a. True
b. False
A tax system under which an individual pays a higher fraction of his income in taxes at
higher levels of income is formally described as
a. digressive.
b. progressive.
c. proportional.
d. regressive.
All of the points inside a production possibilities frontier are ____; all of the points
outside the production possibilities frontier are ____.
a. efficient, inefficient
b. optimal, irrational
c. attainable, unattainable
d. rational, zero-cost
e. unattainable, efficient
If demand is elastic, an increase in price will decrease total revenue.
a. True
b. False
Using specialized equipment to produce simultaneously a number of similar items
a. leads to economies of scale.
b. is the goal of deregulation.
c. can only happen in a high technology nation.
d. is called economies of scope.
Why is the advent of monopoly likely to shift cost curves?
Corporate income is taxed twice-once in the form of corporate income tax and the
second time when the owner must pay income tax on dividends. What are the effects of
this double taxation?
A firm sells in a competitive market in which price is $12. Its marginal cost is 6 + .25Q.
Determine the profit-maximizing level of output.
Is education the swiftest method to eliminate poverty. Explain.
Discuss national defense, infant industry, and strategic trade as arguments for
protection.
“OPEC is exploiting the United States by selling us oil at inflated prices.” Agree or
disagree.
In an effort to prepare for war, the Defense Department is required by Congress to
stockpile helium, once used to provide lift for blimps (phased out in the 1960s). About
100 years of total U.S. usage of helium is in storage. The Pentagon agrees to buy
helium from producers at a price above what would otherwise prevail in the
marketplace. Is this likely to result in efficiency? Explain.