A nation has an unfavorable balance of trade when
a. it has a surplus in its balance of payments
b. it has a deficit in its balance of payments
c. the value of its imports of goods is greater than the value of its exports of goods
d. its current account is in surplus and its capital account is in deficit
e. it has high tariffs
International trade between countries typically produces a winner and a loser.
Generally, it is the economically more advanced country that gains at the expense of the
less developed nation.
a. True
b. False
If the price of a good doubles and quantity supplied triples, then
a. demand is elastic
b. demand is inelastic
c. supply is inelastic
d. supply is elastic
e. there is insufficient information to reach any conclusion about the price elasticity of
supply
Competing-interest legislation involves
a. concentrated costs and widespread benefits
b. both widespread costs and widespread benefits
c. both concentrated costs and concentrated benefits
d. widespread costs and concentrated benefits
e. concentrated costs and either widespread or concentrated benefits
On a graph with x on the horizontal axis and y on the vertical axis, the origin is
a. the point where x = 0 and y = 0
b. any point where x = 0
c. any point where y = 0
d. where a curve intersects the vertical axis
e. where a curve intersects the horizontal axis
Exhibit 6-1
Consider Exhibit 6-1 which shows the total utility derived from various numbers of
glasses of milk consumed in a day. Which of the following statements is true?
a. the marginal utility of milk is always positive
b. the marginal utility of milk first increases, reaches a maximum and then decreases
c. the marginal utility of milk is diminishing throughout
d. the marginal utility of the 4th glass of milk is greater than the marginal utility of the
1st glass of milk
e. the marginal utility of milk while diminishing is always greater than zero
Opportunity cost exists because
a. technology is fixed at any point in time
b. the law of comparative advantage is working
c. resources are scarce but wants are unlimited
d. the value of lost opportunities varies from person to person
e. efficiency is measured by the monetary cost of an activity
In 2011, the United States balance of trade deficit with China was about 4 times as large
as the balance of trade deficit with Canada
a. True
b. False
Ronald Coase’s insight regarding the firm was that
a. firms tend to be more profitable when economies of scale are greater
b. uncertainty and information are the keys to perfect competition
c. perfectly competitive firms tend to displace monopolies
d. economic activity is best understood in terms of the transaction costs of exchange
e. consumers often carry out transactions directly with resource suppliers
Union membership has continued to grow faster than the labor force in the United
States since World War II.
a. True
b. False
Exhibit 5-27
Consider Exhibit 5-27. Which graph depicts a perfectly inelastic demand?
a. Graph A
b. Graph B
c. Graph C
d. Graph D
e. both graphs A and B
Suppose you drink more tea because the price of coffee has increased. Which of the
following best explains your action?
a. the law of supply
b. tea and coffee are complements
c. the substitution effect
d. the income effect
e. your nominal income has increased
Exhibit 6-29
Which graph in Exhibit 6-29 shows the effect of an increase in the price of clothing,
other things constant?
a. Graph a
b. Graph b
c. Graph c
d. Graph d
e. Graph e
Patent laws
a. reduce incentive to innovate by restricting market entry
b. reduce incentive to innovate by making it difficult to use the patented innovation
c. increase incentive to innovate by restricting entry into a market
d. increase incentive to innovate by giving a firm permanent and exclusive production
rights
e. give a firm the right to provide a wide variety of goods or services
In order to dispose of nuclear waste created by power plants around the country, the
government buys land in Glowing Gulch, Idaho. Citizens of that town organize to block
construction of the nuclear waste facility. Which of the following statements is false?
a. The benefits of the nuclear waste facility are widespread.
b. The costs of the nuclear waste facility are concentrated.
c. The citizens of Glowing Gulch are a special-interest group.
d. Consumers of the power generated at the nuclear plants are not likely to organize to
support construction of the nuclear waste facility.
e. The citizens of Glowing Gulch are equally concerned about all public issues.
A profit-maximizing monopolist produces an output level at which
a. marginal revenue is the greatest distance from marginal cost
b. price is less than marginal cost
c. the value to society of the last unit produced equals marginal cost
d. marginal revenue equals marginal cost
e. consumers wish to purchase less than what is produced because of high monopoly
prices
In the U.S., people tend to discard items rather than repair them because
a. Americans are lazy
b. of the high opportunity cost of time
c. it is costly to use land for waste disposal
d. high wages in the waste disposal industry discourages repairs
e. low wages in the repair industry encourages disposal
When the international financial system operated under the gold standard,
a. the currencies of most countries were convertible into gold
b. all international transactions were financed with gold
c. the price of gold was determined by the supply and demand for foreign exchange
d. the quantity of money demanded was always the same
e. there was very little inflation
“There should be less discrimination against women” is an example of a positive
statement.
a. True
b. False
In the short run, producer surplus equals
a. TR – VC
b. TR – AVC
c. TR + VC
d. TR – AFC
e. TR + TC
Which of the following is not an example of a differing taste for work?
a. Some people prefer physical labor and hate office work
b. Some people become airline pilots while others are afraid to fly
c. Winter temperatures are below zero on crab boats off Alaska
d. Teenagers prefer jobs at Starbucks and Gap to those at fast-food restaurants
e. Many people prefer the creative process even though earnings are low
When family incomes are ranked from lowest to highest, the middle income is known
as the
a. median income
b. mean income
c. means-tested income
d. official poverty level
e. transfer income
Under U.S. antitrust law, a consent decree allows a firm to
a. admit to an antitrust violation without penalty
b. admit to an antitrust violation without a lawsuit
c. challenge the government’s accusation in court
d. cease the alleged wrongdoing without admitting guilt
e. cease the alleged wrongdoing only by admitting guilt
The median-voter model attempts to explain
a. why law partners can seldom agree on the division of costs
b. why, in a democracy, the preferences of the typical voter often will dominate other
choices
c. why democracies can evolve into dictatorships
d. elections in which candidates present widely different platforms
e. conditions under which majority rule is better than market exchange
Producer surplus measures the difference between total revenues and fixed cost
a. True
b. False
Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from
home over a cheaper restaurant 15 miles from home. Which of the following is the most
likely explanation for her behavior?
a. The opportunity cost of her time is very low.
b. She doesn’t take travel time into consideration.
c. She doesn’t like to cook or doesn’t know how.
d. The prices at the more expensive restaurant understate the opportunity cost of eating
there.
e. The higher monetary cost of the more expensive restaurant is offset by the higher
opportunity cost of the lower-priced restaurant.
Exhibit 9-11
If the monopolist in Exhibit 9-11 engages in perfect price discrimination,
profit-maximizing output would be
a. 700 units
b. 810 units
c. 884 units
d. 976 units
e. 1,000 units
If a consumer allocates income between goods x and y, consumer equilibrium occurs
when
a. the indifference curve farthest from the origin is reached
b. MUx/Px = MUy/Py and the budget is exhausted
c. marginal utility is maximized
d. MUx = MUy for the last unit consumed of each good
e. consumer surplus equals 0
The marginal revenue product of land curve indicates
a. the additional output generated by an additional unit of land, other things constant
b. the additional cost to the firm when it employs an additional unit of land, other things
constant
c. the additional profit the firm earns when it employs an additional unit of land, other
things constant
d. the additional revenue the firm earns when it employs an additional unit of land,
other things constant
e. the amount of land required to produce an additional unit of output, other things
constant
The distribution of income among African-American families is more even than it is for
the population as a whole.
a. True
b. False
Which of the following would not be considered a role of the government?
a. promoting competition
b. providing public goods
c. providing externalities
d. regulating natural monopolies
e. safeguarding private property and enforcing contracts
Which of the following affects the interest rate on a loan?
a. all of the following
b. the duration of the loan
c. the tax treatment of the loan
d. the administrative cost of the loan
e. the risk of default on the loan
Craft unions typically attempt to increase wages by
a. setting a wage floor
b. reducing labor supply
c. increasing labor demand
d. reducing initiation fees
e. expanding new union memberships
A decrease in price along the elastic segment of a demand curve will
a. increase total utility, marginal utility, consumer surplus, and consumer expenditure
b. decrease total utility, consumer surplus, and consumer expenditure and increase
marginal utility
c. decrease total utility and consumer surplus and increase consumer expenditure and
marginal utility
d. increase consumer surplus through a decrease in consumer expenditure
e. decrease consumer surplus through an increase in consumer expenditure