Compared to regular grocery stores, convenience stores have
a. higher prices and a more limited selection of goods
b. higher prices and a greater selection of goods
c. lower prices and a more limited selection of goods
d. lower prices and a greater selection of goods
e. equal prices and an equal selection of goods
Exhibit 6-5
In Exhibit 6-5, the total utility of consuming five scones is
a. 82
b. 30
c. 34
d. 27
e. 2
Price elasticity of demand is calculated as
a. the percentage change in quantity demanded divided by the percentage change in
price
b. the percentage change in price divided by the percentage change in quantity
demanded
c. the absolute change in quantity demanded divided by the absolute change in price
d. the absolute change in price divided by the absolute change in quantity demanded
e. none of the above
Exhibit 2-2
According to Exhibit 2-2, in any given amount of time,
a. Maria has an absolute and a comparative advantage in typing
b. Maria has an absolute and a comparative advantage in doing laundry
c. Maria has a comparative advantage in both typing and doing laundry
d. Hans has an absolute and a comparative advantage in typing
e. Hans has an absolute advantage in doing laundry
Exhibit 1-16
Refer to exhibit 1-16. Which of the graphs illustrates an inverse or negative relationship
between variable X and variable Y?
a. a
b. b
c. c
d. d
e. e
Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What
impact will this trend have on the foreign exchange market?
a. U.S. demand for foreign exchange, in general, and British pounds, in particular, will
increase.
b. U.S. demand for foreign exchange, in general, and British pounds, in particular, will
decrease.
c. U.S. demand for British pounds will increase, but the demand for foreign exchange
will probably decrease.
d. U.S. demand for British pounds will decrease, but the demand for foreign exchange
will probably increase.
e. There is no effect on foreign exchange.
Exhibit 7-12
For the total product curve in Exhibit 7-12, the average product at point c is:
a. 6
b. 10
c. 25
d. 60
e. unable to be determined
A firm’s marginal resource cost curve is
a. horizontal only if the firm is a price taker in the product market
b. horizontal only if the firm is a price taker in the resource market
c. vertical only if the firm is a price taker in the product market
d. vertical only if the firm is a price taker in the resource market
e. horizontal only if the firm is a price taker in both the product and resource markets
Which of the following most accurately describes the type of mergers that the antitrust
laws are intended to prohibit?
a. mergers that tend to reduce competition
b. horizontal mergers
c. both vertical and horizontal mergers
d. conglomerate mergers
e. vertical mergers
If the demand for a good is very price inelastic, the imposition of a tax on that good
a. places the burden of the tax equally on buyers and sellers
b. permits sellers to pass most of the cost increase resulting from the tax on to the
consumers of the product
c. reduces the profits earned by sellers since they must write the check to pay the tax
d. makes the demand more inelastic
e. makes the demand more elastic
The used car market may be inefficient because the purchase of a used car often
involves
a. natural selection
b. moral hazard
c. hidden actions
d. open-access resources
e. hidden characteristics
Exhibit 8-7
For the profit maximizing perfectly competitive firm represented in Exhibit 8-7, which
of the following is true?
a. the firm will sell its output for $10 per unit and its profit will be zero
b. the firm will shut down
c. the firm will sell its output for $8 per unit and its profit will be negative
d. the firm will sell its output for $8 per unit and its profit will be positive
e. the firm will sell its output for $8 per unit and break even
Suppose a glass of orange juice has a price of $2 and a glass of soft drink has a price of
$1. If the consumer is maximizing utility,
a. juice must have higher MU than soda drink
b. the soft drink must have higher MU than juice
c. both must have equal MU
d. consumers would buy more soda drink than orange juice
e. the consumer would buy twice as much orange juice as soft drink
The statement that firms minimize cost means all of the following except that
a. they produce the most output they can with each given level of resources
b. the output they produce could not be produced using fewer resources
c. firms maximize revenues
d. firms are technologically efficient
e. each level of output is produced in the least expensive manner
Derived demand refers to
a. demand curves derived from utility functions
b. an individual demand curve estimated from a market demand curve
c. a market demand curve estimated from individual demand curves
d. demand for a resource derived from the demand for the product produced by that
resource
e. demand for a product derived from the demand for the resource used to make that
product
In a market economy, household income is determined primarily by
a. the age of the head of household
b. the gender of the head of household
c. luck
d. the productivity of labor resources
e. government transfer payments
Signaling is the attempt by the uninformed side of the market to uncover the relevant
but hidden characteristics of the informed party.
a. True
b. False
When a court uses the per se rule to interpret the Sherman Antitrust Act, its ruling is
based on market conduct alone.
a. True
b. False
A utility-maximizing consumer equalizes marginal utilities across all goods.
a. True
b. False
Which of the following statements is not true of fixed and flexible exchange rate
systems?
a. Under fixed exchange rates, government officials have little direct role in the foreign
exchange market.
b. Under fixed exchange rates, the government must select an appropriate exchange
rate.
c. Under fixed exchange rates, active central bank intervention is necessary to maintain
the fixed exchange rate.
d. Under fixed exchange rates, the governments must stand ready to buy all foreign
exchange offered to it and supply all foreign exchange demanded from it.
e. Flexible exchange rates rely on market forces to set the exchange rate, but fixed
exchange rates are set by central banks.
Any international transfer made on concessional terms for the purposes of promoting
economic development is
a. foreign aid
b. first aid
c. immigration
d. private investment
e. remittances
Someone once said that Chevrolet is so large that if it shakes its tail, its takes two years
for its head to notice it. This is an example of
a. profit centers
b. economies of scale
c. diseconomies of scale
d. diminishing marginal returns
e. diminishing marginal cost
Suppose an investment will yield $1,000 after one year and $2,000 after two years.
What is the present value of this investment if the discount rate is 8 percent?
a. $2,479.34
b. $2,640.60
c. $2,727.27
d. $3,000
e. $3,520
Which of the following contributed to the collapse of the Bretton Woods system?
a. chronic U.S. trade surpluses
b. fixed exchange rates
c. an insufficient gold supply
d. West Germany’s allowing the dollar to float against the mark
e. West Germany’s not wanting the dollar to appreciate
With respect to the average cost curves, the marginal cost curve
a. intersects average total cost, average fixed cost, and average variable cost at their
minimum points
b. intersects average total cost, average fixed cost, and average variable cost at their
maximum points
c. intersects both average total cost and average variable cost at their minimum points
d. intersects average total cost where it is increasing and average variable cost where it
is decreasing
e. intersects only average total cost at its minimum point
The American Association of Retired Persons (AARP) provides checklists summarizing
the voting and attendance records of legislators. Which of the following is true?
a. If the AARP’s members were rational, it wouldn’t have to do this.
b. This policy is useless if AARP members are rationally ignorant.
c. This policy is intended to reduce voters’ rational ignorance by decreasing the cost of
information.
d. If AARP members read this information, their rational ignorance would be
eliminated.
e. If all voters in the nation read this information, their rational ignorance would be
eliminated.
Which of the following is an example of a normative statement?
a. If the money supply falls, interest rates will rise.
b. Teenage unemployment would be lower if there were no minimum wage.
c. The quantity of shirts sold increases as the price of shirts decreases.
d. The federal government’s total spending should be reduced.
e. If interest rates go up, then construction activity will fall.
The rail system in Metropolis is a natural monopoly. If the government regulates the
system by setting the fare equal to marginal cost, which of the following will be true?
a. The managers of the rail system will be allowed to adjust marginal cost so that they
can get a normal rate of return on capital.
b. The managers of the rail system will be allowed to adjust marginal cost so that they
can get a fair profit.
c. The rail system will earn economic profit at that fare.
d. If the government doesn’t give the rail system a subsidy to supplement revenue from
fares, the system will face continuous economic losses.
e. If the government doesn’t give the rail system a subsidy to supplement revenue from
fares, fare increases will push marginal cost upward.
Farm income has fallen in part because demand for farm products is price inelastic and
income inelastic.
a. True
b. False
Rationality implies that in order to get what they want, people will spend the most time
and effort
a. making private market decisions
b. getting politically involved
c. investigating political candidates’ platforms
d. debating social issues
e. writing to Congress
Data on the U.S. income distribution suggest that
a. black-white income differentials have decreased
b. black-white income differentials have increased
c. the distribution of income among blacks is more uneven than the overall distribution
of income
d. the distribution of income among blacks is less uneven than the overall distribution
of income
e. the distribution of income among blacks follows approximately the same pattern as
the overall distribution of income
Asymmetric information exists when one participant in a market transaction has more
information than the other participant.
a. True
b. False
A decrease in demand will cause a(n)
a. increase in supply
b. decrease in supply
c. increase in quantity supplied
d. increase in equilibrium price
e. decrease in equilibrium price