Compared to the short run, the long-run market supply curve is
a. less elastic
b. equally elastic
c. more elastic
d. always negatively sloped
e. None of the answers is correct.
Which pair of groups benefits from an import quota when quota rights are given away
without charge?
a. domestic and foreign producers
b. domestic producers and foreign consumers
c. domestic government and foreign consumers
d. domestic government and producers
e. foreign consumers and producers
Suppose y is measured on the vertical axis, x is on the horizontal axis, and the various
combinations of x and y are shown by a nonvertical straight line. Which of the
following must be true?
a. There is a negative relation between x and y.
b. There is a positive relation between x and y.
c. There is a causal relation between x and y.
d. If the value of x is known, the value of y can be determined.
e. The value of y is independent of the value of x.
A problem for developing countries is that the prices of primary products fluctuate more
widely than do the prices of finished goods because
a. crop supply changes very little despite the weather
b. crop supply fluctuates with the weather
c. weather never varies
d. crops go in and out of fashion as new diets are developed
e. crop demand fluctuates with the weather
When economists say that people act as rational decision makers, that means
a. they gather all relevant information before making their purchases
b. once a pattern of behavior has been established, people tend to become set in their
ways
c. people respond in predictable ways to changes in costs and benefits
d. people rarely make errors when they are permitted to make transactions
e. once made, decisions are never reversed
Which of the following statements about the substitution effect of a price change is
true?
a. It is caused by a change in relative prices.
b. It affects the consumer’s ability, rather than willingness, to purchase a good.
c. It assumes that the consumer substitutes more expensive goods for cheaper ones
when income increases.
d. It is usually equal to the income effect.
e. It may cause the consumer to buy less of the good when its price falls.
Which country is the United States’ largest trading partner?
a. Canada
b. Japan
c. Great Britain
d. Mexico
e. South Korea
The law of increasing opportunity cost explains why
a. opportunity cost is constant along the production possibilities frontier
b. the production possibilities frontier is downward sloping
c. the production possibilities frontier is curved
d. efficient points lie along the production possibilities frontier
e. technology remains constant along a production possibilities frontier
Exhibit 19-8
If the country in Exhibit 19-8 is initially trading without restrictions at a world price of
$2.00 and an import quota of 50 units per month is enacted,
a. imports will not change
b. imports will increase from 25 to 50 units per month
c. domestic production will increase from 100 to 175 units per month
d. domestic production will increase from 100 to 125 units per month
e. domestic production will increase from 100 to 150 units per month
The adverse selection problem is least likely in which of the following occupations?
a. lawyer
b. barber
c. college professor
d. marketing analyst
e. manager
Which of the following would be considered tax evasion?
a. deducting charitable contributions when figuring income taxes
b. claiming your young children as tax exemptions
c. claiming your dog as a dependent on your tax form
d. buying a house in order to deduct interest payments
e. overestimating your income subject to taxes
When a resource is an open-access resource,
a. each individual in the society owns it
b. the group owns it
c. no one owns it
d. the government owns it
e. some nonprofit agency owns it
The optimal level of air quality
a. is 100 percent, which creates a pollution-free environment
b. is smaller the lower the marginal social cost of air quality
c. is greater the lower the marginal social benefit of air quality
d. is greater the lower the marginal social cost of air quality
e. is smaller the greater the marginal social benefit of air quality
On a given production possibilities frontier, which of the following is not assumed to be
fixed?
a. the amount of labor available
b. the amount of capital available
c. the level of technology
d. the amount of land and natural resources available
e. production of each item
Exhibit 6-1
Consider Exhibit 6-1 which shows the total utility derived from various numbers of
glasses of milk consumed in a day. The total utility curve does not exhibit diminishiung
returns.
a. True
b. False
Through collective bargaining,
a. representatives of an employer negotiate with the rank and file of the union
membership
b. union and nonunion members combine forces in negotiation
c. craft and industrial unions combine forces in negotiation
d. contracts are worked out between representatives of the union and employer
representatives
e. union workers must accept contracts negotiated by their representatives
Exhibit 15-5
Consider the natural monopoly depicted in exhibit 15-5. If regulators set the price so the
natural monopolist to at least break-even, how much output will the monopolist
produce?
a. 4 units
b. 5 units
c. 6 units
d. 7 units
e. 8 units
Exhibit 6-6
Using Exhibit 6-6, calculate the marginal utility of the third plum consumed.
a. 4
b. 6
c. 24/3
d. 9
e. 24
In order for the balance of payments to balance,
a. the current account balance must equal the capital account balance
b. international reserves must flow out of the country
c. international reserves must flow into the country
d. the current account balance plus the capital account balance plus the net flow of
international reserves plus the statistical discrepancy must equal zero
e. the current account balance plus the capital account balance plus the net flow of
international reserves must be greater than the statistical discrepancy
In the long run, a monopolistically competitive firm will
a. produce a greater variety of goods than do firms in other market structures
b. produce a greater output level than would a perfectly competitive firm
c. produce where price equals average total cost
d. earn an economic profit
e. suffer a loss because of its advertising budget
Which of the following is nottrue of a perfectly competitive market?
a. Firms experience constant returns to scale.
b. Firms face significant barriers to entry.
c. Economic profit is zero.
d. Each firm chooses the quantity it wants to sell.
e. Each firm knows the prices of outputs and inputs.
According to the U.S. Supreme Court’s 1920 ruling on U.S. Steel,
a. all monopolies are illegal
b. all oligopolies violate the Sherman Antitrust Act
c. large firms cannot be found to be in violation of the Sherman Antitrust Act
d. “mere size is no offense”
e. possession of market power is sufficient for a firm to be found in violation of the
Sherman Antitrust Act
Exhibit 8-15
The purely competitive firm in Exhibit 8-15 should
a. shut down
b. produce 5 units of output
c. produce 10 units of output
d. produce 12 units of output
e. produce 20 units of output
If the United Mine Workers successfully negotiates a wage that is higher than the
competitive wage,
a. an excess demand for labor is created
b. a surplus of labor is created
c. the demand for labor increases
d. the supply of labor decreases
e. the quantity of labor demanded increases
A rightward shift of a demand curve represents a decrease in demand.
a. True
b. False
Exhibit 10-15
Exhibit 10-15 depicts the payoff matrix facing Eagle Tobacco and Dan”l Boone
Tobacco with respect to their decisions to advertise or not. What strategies will most
likely result?
a. Eagle advertise and Dan”l Boone doesn”t
b. both advertise
c. Eagle doesn”t advertise and Dan”l Boone does
d. neither advertises
e. can”t tell
As a real estate agent, Krista Otavi prides herself on her good training, availability to
clients, and hard work to make a sale. Which one of the basic ways of product
differentiation does Krista emphasize?
a. services
b. product image
c. location
d. commission rate
e. physical differences
A university should not disband its football team if it has already paid for the stadium.
a. True
b. False
Suppose that an increase in population increases demand in New Haven County’s
perfectly competitive market for auto repair. Which of the following is true in the short
run?
a. Auto repair centers may be able to earn economic profit.
b. Normal profits increase.
c. The market supply curve of auto repair services shifts to the left.
d. Either price or output is likely to increase, but it’s impossible to say which.
e. After firms have had time to adjust to the new equilibrium, the price of auto repair
services will exceed the marginal cost.
If the substitution effect dominates the income effect, then an increase in the wage rate
will increase the quantity of labor supplied by an individual.
a. True
b. False
Special-interest groups have little incentive to
a. earn profits
b. redistribute wealth
c. lobby Congress
d. make the economy more efficient
e. seek regulation beneficial to them
Which of the following is not correct concerning predatory dumping?
a. It may be a way to discourage the development of domestic production of a good.
b. It may drive out established firms.
c. There are a great number of documented cases of predatory dumping.
d. In actuality, the blocking of entry on a worldwide scale would be extremely difficult
to accomplish.
e. In pursuing their monopoly position after dumping, dumpers may actually encourage
the entry of other firms.
Insurance companies try to avoid adverse selection and moral hazard problems through
all of the following methods except one. Which is the exception?
a. offering group policies
b. requiring lengthy application forms
c. requiring physical examinations
d. setting uniform premiums (i.e., prices of insurance policies) for all policies
e. requiring policyholders to pay a deductible