Price ceilings will likely
a. result in the accumulation of surpluses.
b. increase the volume of transactions as we move along the demand curve.
c. increase production as producers respond to higher consumer demand at the low
ceiling price.
d. result in the development of black markets.
A monopolistic competitor faces a horizontal demand curve.
a. True
b. False
Entrepreneurship is
a. restricted to perfect competition.
b. occurs only in well-functioning markets.
c. the process of planting new crops.
d. the process of taking business risks.
When the goods of competing companies are identical, consumers have no reason to
prefer one product over the other so the demand curve for each manufacturer will be
perfectly elastic.
a. True
b. False
What mechanism assures that producers use inputs efficiently?
a. governmental regulations on use of resources
b. altruism
c. the desire for profit
d. an innate desire to be efficient
e. All of the above are correct.
Figure 7-15
For a firm at equilibrium, at point A in Figure 7-15
a. the price of labor is high relative to the price of machines.
b. the MPP of labor is greater than the MPP of machines.
c. the MPP of labor is less than at point B.
d. output is higher than at point B.
Supply and demand analysis
a. can be used to understand solutions to pollution, but not causes.
b. can be used to analyze how externalities lead to environmental problems.
c. cannot be used to analyze pollution, which is a physical and chemical problem.
d. cannot be used to solve the pollution problem, but can be used to analyze it.
Define the following terms and explain their importance to the study of economics:
a. regressive tax
b. proportional tax
c. progressive tax
d. direct tax
e. indirect tax
Economic discrimination occurs when equivalent factors of production receive different
payments for equal contributions to output.
a. True
b. False
The employment effect of a minimum wage increase is greater the
a. more elastic the demand for labor.
b. less elastic the demand for labor.
c. more the wage ceiling shifts the supply curve.
d. more the wage floor shifts the demand curve.
What is the economic reasoning behind the proposal to legalize drugs?
a. Legal drugs will greatly increase the supply, which will reduce the price Americans
pay to foreign producers of the drugs.
b. All forms of government restrictions on behavior are immoral, and ought to be
removed.
c. Legal drugs will be much cheaper than illegal drugs, which will reduce incentive for
crime to obtain money for drugs and to protect drug “businesses.”
d. Legal drugs will be more expensive than illegal drugs, and the market system will
encourage more production, thus lowering the price.
e. Dealing with supply is always easier than dealing with demand, and legalization
accomplishes that.
An industry can be defined as
a. the group of all firms that sell a product.
b. any company that produces and sells something.
c. the set of buyers of a particular good or service.
d. the top companies that sell something.
The cost of a hospital stay has been going down slowly.
a. True
b. False
Markets in which the behavior of the firms theoretically leads to an efficient allocation
of resources that maximizes the benefits to consumers given the resources available to
consumers are
a. monopolistic competition and oligopoly.
b. monopoly and oligopoly.
c. monopolistic competition and monopoly.
d. perfect competition and perfectly contestable.
The salary of an athlete like Peyton Manning is in part a reward for his unique
ability-something economists call economic rent.
a. True
b. False
To protect the environment, governments in the United States have mainly used
a. legally enforceable direct controls on pollution.
b. taxes on goods whose production creates pollution.
c. direct taxes on emissions.
d. discretionary guidelines suggested to polluting firms.
Many public utilities are permitted to operate as monopolies because they enjoy
economies of large-scale production.
a. True
b. False
To an economist, the cost of a college education
a. includes the income that the student could have earned during the time spent in
college.
b. can be measured solely by the dollar cost of tuition, books, and other fees.
c. includes only the cost of schooling, not the cost of housing and food.
d. excludes financial aid in computation of the cost of schooling.
e. All of the above are correct.
Affirmative action programs are intended to combat
a. poverty.
b. economic inequality.
c. discriminatory practices by employers.
d. “comparable worth” systems of compensation.
The share of GDP taken by taxes is considerably higher in the United States than in
other countries.
a. True
b. False
According to the ____ view, a nation’s wealth consists of the amount of gold or other
monies at its command.
a. Keynesian
b. free trade
c. mercantilist
d. monetarist
The slope of a curved line differs from that of a straight line in that
a. the numerical value of the slope of a straight line is different at every point, but is the
same at every point for a curved line.
b. the numerical value of the slope of a straight line is always higher than the numerical
value of the slope of a curved line.
c. the numerical value of the slope of a curved line is different at every point, but is the
same at every point for a straight line.
d. the numerical value of the slope of a curved line is an irrational number, but the
numerical value of the slope of a straight line is always a rational number.
e. straight lines are more realistic, but curved lines are not descriptively accurate for the
real world.
Many regulated industries are not pure monopolies.
a. True
b. False
Mr. Paque is a bear hunter for timber companies that want to diminish damage to trees
done by bears in the spring. Due to a reduction in the bear population between 1995 and
2005, Mr. Paque finds fewer bears each year and additional hours spent hunting
produce fewer additional bears. With the information given and noting that the bounty
on bears has risen, one can conclude that (i) Mr. Paque’s income per hunting hours will
fall; (ii) the derived demand for Mr. Paque’s services will shift left.
a. i and ii
b. i not ii
c. ii not i
d. neither i nor ii