Tacit collusion is ________ to be successful in increasing industry profits when there
are ________ similar firms in the industry.
A) more likely; many
B) less likely; a few
C) more likely; a few
D) always; no
If the interest rate is 12%, the current market value of $1 to be delivered in one year is
A) $0.89.
B) $0.95.
C) $1.00.
D) $1.15.
What percentage of United States personal income in 2012 came from transfer
payments?
A) 18%
B) 25%
C) 51%
D) 64%
An efficient economy is an economy that produces what ________ demand(s) and does
so at the ________ possible cost.
A) consumers; highest
B) consumers; least
C) the government; highest
D) the government; least
Among the fundamental concepts in economics are
A) opportunity cost.
B) marginalism.
C) efficient markets.
D) all of the above
Figure 3.19
Refer to Figure 3.19. When the economy moves from Point A to Point E, there has been
A) an increase in demand and an increase in supply.
B) a decrease in demand and a decrease in supply.
C) an increase in demand and a decrease in supply.
D) an increase in quantity demanded and an increase in quantity supplied.
Equilibrium in this market occurs at the intersection of curves S and D.
Figure4.6
In figure 4.6, producer surplus changes by the area [E + F] if price goes from
equilibrium to
A) P1.
B) P3.
C) < P1.
D) > P3.
Warranties, education, extracurricular activities are all examples of
A) market signals.
B) risk premiums.
C) tools that can correct the moral hazard problem.
D) incentives.
Examining the equilibrium conditions of individual markets and for households and
firms separately is referred to as
A) partial equilibrium analysis.
B) general equilibrium analysis.
C) comparative statics.
D) efficiency analysis.
Which of the following characteristics is generally representative of developed
countries relative to developing countries?
A) a larger percentage of the labor force in rural areas
B) a lower infant mortality rate
C) lower productivity in the agriculture sector
D) a lower rate of literacy
The amount that a consumer pays to consume an additional unit of a particular good is
the marginal
A) private cost.
B) damage cost.
C) positive cost.
D) social cost.
An effective price floor must be set
A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or below the equilibrium price.
The United States has a comparative advantage in the production of wheat, and Haiti
has a comparative advantage in the production of sugar. If both countries specialize
based on the theory of comparative advantage,
A) only the production of wheat will increase.
B) the production and consumption of both goods will increase.
C) only the production of both goods will increase.
D) only the consumption of both goods will increase.
Figure 15.6
Refer to Figure 15.6. If Trollio’s T-shirts is in long-run equilibrium, it is producing
________ silk-screened T-shirts and selling each T-shirt at a price of ________.
A) 20; $5
B) 50; $10
C) 50; $16
D) 60; $15
The belief that what is true for a part is necessarily true for the whole describes the
A) fallacy of composition.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of division.
D) fallacy of inductive reasoning.
A firm will begin to experience diminishing returns at the point where
A) marginal cost increases.
B) marginal cost decreases.
C) marginal product increases.
D) Both B and C are correct.
The cross-price elasticity of demand between good X and good Y is -3. Given this
information, which of the following statements is true?
A) The demand for goods X and Y is elastic.
B) Goods X and Y are substitutes.
C) Goods X and Y are complements.
D) The demand for goods X and Y is income elastic.
An investment should be undertaken
A) if the present value of the expected income stream associated with the investment is
greater than the full cost of the investment project.
B) if the present value of the expected income stream associated with the investment is
less than the full cost of the investment project.
C) any time the present value of the expected income stream associated with the
investment is positive.
D) if the present value of the costs of the investment project exceed the present value of
the expected returns from the investment project.
Periods of less than full employment correspond to
A) points outside the ppf.
B) points underneath the ppf.
C) points on the ppf.
D) either points inside or outside the ppf.
Initially the wheat and corn markets are in equilibrium, then preferences shift away
from wheat and into corn. If you are a wheat farmer, the best profit-maximizing strategy
is to
A) shut down.
B) increase output so as to increase your market share.
C) shift more of your farming capacity wheat production.
D) decrease output so as to minimize short run losses.
Related to the Economics in Practice on page 108: If the demand for cigarettes is more
________ for underage smokers as compared to that of adult smokers, then compared
to adults, a tax on cigarettes would have ________ impact on the demand for cigarettes
for teenagers.
A) elastic; more
B) elastic; less
C) inelastic; more
D) inelastic; an equal
The case for product differentiation includes the assertion that
A) even products that do not satisfy a real demand survive.
B) standards of living rarely improve with product innovation.
C) new products satisfy people with different preferences.
D) it wastes society’s scarce resources.
Figure 7.6
Refer to Figure 7.6. If the price of capital is $20 and the price of labor is $10, the
optimal product technique is
A) A.
B) B.
C) C.
D) D.
Table 3.2
Refer to Table 3.2. If the price per cheeseburger is $5, there is an excess
A) demand of 300 cheeseburgers.
B) supply of 500 cheeseburgers.
C) demand of 1,000 cheeseburgers.
D) supply of 2,000 cheeseburgers.
Figure 18.4
Refer to Figure 18.4. The second-wealthiest fifth of families earned ________% of
income in Outland.
A) 17
B) 25
C) 60
D) 95
Which of the following statements is true?
A) Economists believe that average tax rates have a greater influence on behavior than
marginal tax rates.
B) Economists believe that marginal tax rates have a greater influence on behavior than
average tax rates.
C) Economists believe that marginal and average tax rates influence behavior to the
same extent.
D) Economists believe that neither marginal nor average tax rates have any influence on
behavior.
When all the conditions for perfect competition are met,
A) resources are allocated among firms efficiently.
B) final products are distributed among households efficiently.
C) the system produces the goods and services consumers want.
D) All of the above are correct.
________ utility is the additional satisfaction gained by consuming ________ of a
good.
A) Marginal; all units
B) Total; one more unit
C) Total; no more units
D) Marginal; one more unit
Figure 3.19
Refer to Figure 3.19. When the economy moves from Point A to Point C, there has been
A) a decrease in supply and a decrease in quantity demanded.
B) a decrease in quantity supplied and a decrease in demand.
C) a decrease in supply and an increase in quantity demanded.
D) an increase in supply and a decrease in quantity demanded.
Both Kate and John own saltwater taffy factories. Kate’s factory has low fixed costs and
high variable costs. John’s factory has high fixed costs and low variable costs.
Currently, each factory is producing 1,000 boxes of taffy at the same total cost.
Complete the following statement with the correct answer. If each produces
A) less, their costs will be equal.
B) more, their costs will be equal.
C) more, the costs of Kate’s factory will exceed those of John’s factory.
D) less, the costs of Kate’s factory will exceed those of John’s factory.
For the top 10% of families in the income distribution, transfer payments account for
approximately what percentage of income?
A) 3%
B) 38%
C) 52%
D) 80%
Explain why a computer might depreciate rapidly just in one year even if it is in just as
good of a condition as the day it was purchased?
What is the economic problem? How does a command economy solve the economic
problem?
In the 1970s there was a long draught in California that left a large section of Southern
California parched. As water prices began to soar how do you think most residents
changed their consumption of water? What kinds of water consumption probably did
not change and why? Make sure to use utility in your explanation.
The U.S. market for rice is shown below.
The world price of rice is $12 per bushel and the U.S. can buy all
of the rice that it wants at that price. The government places a tax on imported rice of
$2 per bushel. Show the effect of this tax on the graph above. What will happen to the
amount of rice the U.S. imports?
Can the same principles that have been used in the study of advanced economies be
used to study less developed economies as well? Explain your answer.
What happens when a firm encounters diminishing returns? What causes diminishing
returns?
When the price of compact disc players decreases, the demand for compact discs
rises while the demand for cassette tapes decreases. What does this imply about the
relationship between compact disc players, compact discs, and cassette tapes?
Why would a company be more enthusiastic in providing more training to its workers
during an economic downturn than during an economic boom (assuming that they do
not layoff their workers and can keep them when the economy recovers)?
Define GNI or Gross National Income.
With regard to transition economies what is meant by shock therapy?
A firm producing cotton fabric reports the following production information:
Does this production function exhibit diminishing returns? Explain.
Explain comparative advantage.
What is the shutdown point?
What four decisions must firms with market power make?
Why is income and wealth typically used as a measure of the “distribution of economic
well being” rather than utility.