What would happen to the budget line if the price of orange juice increased and orange
juice is measured on the vertical axis?
a. It would shift to the right.
b. It would rotate outward along the horizontal axis.
c. It would rotate inward along the horizontal axis.
d. It would rotate outward along the vertical axis.
e. It would rotate inward along the vertical axis.
If income rises and the demand for toothbrushes stays the same, income elasticity of
toothbrushes is said to be unit elastic.
a. True
b. False
An increase in the U.S. demand for foreign exchange will
a. decrease the price of foreign exchange
b. decrease the value of the U.S. dollar
c. increase the value of the U.S. dollar
d. make foreign goods less expensive in U.S. dollars
e. make U.S. goods more expensive in foreign exchange
Exhibit 2-9
Current production at which labeled point in Exhibit 2-9 would lead to the largest
outward shift in the production possibilities frontier in a later year?
a. point a because this point represents a greater consumption level than point b
b. point b because this point represents greater total production than the other two
points
c. point c because this point represents a greater consumption level than the other two
points
d. point b because this point represents greater production of capital than point c
e. point c because this point represents greater production of capital than the other two
points
The price elasticity of demand helps determine the effect of price changes on a firm’s
a. property taxes
b. profits
c. quantity supplied
d. revenues
e. total costs
In a market economy, income depends mostly on
a. productivity
b. luck
c. age
d. sex
e. discrimination
A cooperative, or “co-op” for short, is a single-owner firm.
a. True
b. False
Most companies that sell CDs by mail deliver in 1 to 2 weeks. Mosey Music, Inc., takes
4 weeks to deliver CDs. We should expect that Mosey Music
a. will lose all its customers
b. will not lose customers because the good in question is CDs, not the delivery date
c. will have to charge more for its CDs to make up for the business it loses through slow
delivery
d. will have to charge less for its CDs to compete with firms that deliver CDs faster
e. will be able to charge the same amount for its CDs as other firms do, as long as the
CD quality is the same
It is possible for one person to have an absolute advantage in something even if she has
no comparative advantage in anything.
a. True
b. False
A natural monopoly is based on economies of scale.
a. True
b. False
Which of the following U.S. antitrust laws prohibits mergers through the acquisition of
a firm’s stock if the merger would lessen competition?
a. the Sherman Antitrust Act
b. the Clayton Act
c. the Robinson-Patman Act
d. the Celler-Kefauver Anti-Merger Act
e. the Federal Trade Commission Act
When a market is in equilibrium,
a. producers earn profits
b. the minimum possible price is achieved
c. there is no incentive for consumers or producers to change their current behavior
d. excess demand is less than excess supply
e. the maximum possible price is achieved
A do-it-yourself approach to production is more likely when
a. technology is complex
b. inputs are difficult to identify
c. resources cannot easily be measured
d. the price of inputs is known
e. contracts are complex
Exhibit 10-7
Assume that the firm in Exhibit 10-7 is maximizing profit. Its total revenue is
a. $5,320
b. $5,700
c. $4,750
d. $8,120
e. $8,100
The Superfund was designed to clean up
a. the acid rain problem
b. air pollution from automobiles, buses, and trucks
c. water pollution from agricultural sources (i.e., pesticides)
d. water pollution from dumping raw sewage
e. toxic waste dumps
The shape of short-run variable cost curve is determined by
a. the firm’s effort to minimize cost
b. the firm’s effort to maximize profit
c. competition in the industry
d. the marginal productivity of the variable inputs the firm uses
e. the money the firm spends
If the supply curves for the following goods were plotted, they all would slope upward
except one. Which is the exception?
a. red Corvettes
b. yogurt
c. diamond rings
d. original copies of the Mona Lisa
e. wine from Greece
An increase in the price of a good normally increases the
a. demand for its substitutes
b. supply of complements for the good
c. purchasing power of consumers’ dollar incomes
d. money income of the consumer
e. quantity demanded of all goods that are unrelated to the good in question
The opportunity cost of an activity is best measured
a. only by the monetary costs
b. by the number of alternative activities that were forgone
c. by the cost difference between the chosen activity and the next best alternative
d. by the value expected from the best alternative that is forgone
e. as the time wasted choosing among various activities
Microeconomics is the study of
a. marginal or inferior products
b. the economic behavior of individual decision makers
c. the behavior of the economy as a whole
d. how to use the fewest natural resources to produce goods and services
e. government’s role as a producer in the economy
If a candy bar sells for 50 cents and video games are 25 cents each, the horizontal
(candy) intercept of Ann’s budget line is 12 and the vertical (video game) intercept of
Ann’s budget line is 24. Giving up one video game makes it possible for Ann to afford
a. 2 fewer candy bars
b. half of an additional candy bar
c. 2 more candy bars
d. 12 more candy bars
e. 24 more candy bars
Fishing, the lumber industry, tourism, and even city buildings in Canada are harmed by
acid rain, most of which comes from the United States. According to the Coase
theorem, the problem is
a. easy to solve because the United States and Canada are geographically close
b. easy to solve because the United States and Canada are allies
c. easy to solve because international property rights are recognized among capitalist
countries
d. hard to solve because international negotiations are more costly than domestic ones
e. hard to solve because Canadians have property rights to clean, nonacidic rain
Asymmetric information exists when both sides of a market approach perfect
information.
a. True
b. False
Which of the following represents the best example of personal interest?
a. the paycheck that Freeda brings home from her job as a computer programer
b. the interest that Hans earns from the savings account he has with USA Bank
c. the revenue that Janet has left over after she pays all the expenses associated with
running her software development business
d. the check that Hunter receives each month for leasing his land to the natural gas
company that is drilling on his land
e. the check that Trisha gets each month from the Social Security Administration
Which of the following does notreflect a positive rate of time preference?
a. Concert-goers yell and scream when the stage is still dark an hour after the concert
was scheduled to start.
b. Borrowers have to pay interest on loans.
c. A dieter, allowed three ounces of butter per day, spends the whole allotment on her
toast at breakfast.
d. A dieter, allowed three ounces of butter per day, promises himself some new clothes
if he can break the habit of spending the whole allotment on his toast at breakfast.
e. A student stays up late every night for a week to finish her term paper two months
before it is due.
If the tea harvest is bad in a particular year, what will happen in the market for coffee?
a. increased price and decreased quantity
b. increased price and increased quantity
c. decreased price and increased quantity
d. decreased price and decreased quantity
e. no change in equilibrium price and quantity
The cross-price elasticity of demand between milk and soft drinks is likely to be
a. negative because the goods are complements
b. positive because the goods are complements
c. negative because the goods are substitutes
d. positive because the goods are substitutes
e. 0 because the goods are not usually consumed by the same person at one time
If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it
must be true that
a. we are both at least as well off as we were before
b. I am better off than I was before, but you are not
c. you are better off than you were before, but I am not
d. we are both better off than before
e. we are both worse off than before
Exhibit 12-6
In Exhibit 12-6, if a union raises the market wage to $4, total employment by the firm
(in the right-hand panel) will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
Economists assume that firms seek to
a. maximize accounting profit
b. maximize economic profit
c. maximize total revenue
d. maximize normal profit
e. minimize cost
Suppose you have an hour before your next class starts. You can either read a book, get
something to eat, or take a nap. The opportunity cost of getting something to eat is
a. the cost of what you eat
b. the value of reading and sleeping
c. the loss of value from not reading or sleeping
d. the net benefit of sleeping for another hour
e. impossible to determine because the most preferred alternative is not known
Exhibit 9-21
In Exhibit 9-21, D = AR represents the market demand curve for bicycles, MRm
represents the marginal revenue curve for a monopolist producer of bicycles and Sc =
MC = AC represents the marginal cost curve for a monopolist producer of bicycles and
the market supply curve when the market is perfectly competitive. The output in a
competitive industry would be
a. 2 bicycles
b. 3 bicycles
c. 4 bicycles
d. 5 bicycles
e. 6 bicycles