Which of the following is one of the chief reasons for the increased number of married
women in the U.S. work force?
a. The marginal cost of working in the labor force has increased.
b. Jobs provide greater independence and self-worth.
c. The opportunity cost of household work has increased.
d. The sunk cost of household appliances has risen to the point that women must work
to make payments on them.
e. Women spend more time in the market as a result of the increasing division of labor
in household production.
Which of the following did not occur during the Industrial Revolution?
a. Production became more reliant on highly specialized equipment.
b. A more efficient division of labor was promoted.
c. Workers bore much of the costs of production.
d. The transaction costs of contracting with individual resource owners were reduced.
e. Technological development increased the productivity of most workers.
Economies of scale occur where
a. long-run average cost falls as new firms enter the industry
b. short-run average cost falls as new firms enter the industry
c. long-run average cost falls as one firm expands plant size
d. short-run average cost falls as one firm expands plant size
e. long-run average cost rises as one firm expands plant size
Which of the following would shift the supply curve for a good to the left?
a. an increase in the price of that good
b. a decrease in the price of an alternative good
c. an improvement in technology for producing that good
d. an increase in the cost of an important resource used to make that good
e. an increase in the number of producers
The purchasing power parity theory helps explain long-run trends in exchange rates, but
not short-run fluctuations.
a. True
b. False
According to Coase,
a. government regulation will almost always be necessary to eliminate negative
externalities
b. externality problems can be solved efficiently by the assignment of property rights if
transaction costs are low
c. when bargaining costs are high, it is necessary to assign property rights
d. assignment of property rights will lead to equitable but inefficient solutions to
externality problems
e. there really is no externality problem with renewable resources
Currently, union membership in the U.S. is
a. declining as a percentage of the labor force
b. remaining constant
c. increasing as a percentage of the labor force
d. increasing in the service sector
e. decreasing among government employees
Gilligan runs the only dry-cleaning business on a desert isle. If the cost of cleaning fluid
falls, he can increase profit by
a. raising price
b. charging the highest price he can
c. using less cleaning fluid
d. lowering price
e. charging a price equal to marginal cost
Exhibit 9-1
In Exhibit 9-1, the marginal revenue of the third unit is
a. $20
b. $120
c. $100
d. $40
e. $0
The largest drop in the percentage of families below the poverty level occurred
a. in the 1960s
b. in the 1970s
c. in the 1980s
d. in the early 1990s
e. during the recession of the early 1980s
Exhibit 16-5
Exhibit 16-5 represents the market for leaf tobacco. Suppose the government imposes a
floor of $1.25 in this market. In order to maintain this price the government will need to
buy how many pounds of tobacco?
a. 1,000 lbs.
b. 2,000 lbs.
c. 3,000 lbs.
d. 4,000 lbs.
e. 5,000 ibs.
President Nixon “closed the gold window”
a. as a political expediency
b. to force the allies to devalue their currencies
c. to try to save the Bretton Woods exchange rate system
d. to halt dramatic inflows of gold into the United States
e. to cure the U.S. domestic deflationary spiral
Government restrictions on the use of an open-access resource
a. may improve efficiency
b. will decrease efficiency
c. are unnecessary
d. contribute to pollution of the resource
e. contribute to depletion of the resource
Exhibit 8-19 A Single Firm in a Perfectly Competitive Market
Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive
firm. If P2 represents the equilibrium market price. What is the profit-maximizing
quantity for the firm?
a. Q1bushels
b. Q2bushels
c. Q3bushels
d. Q4bushels
e. Q5bushels
When the benefits to society of using a product exceed benefits to the user,
a. the product should be strictly regulated
b. the product should be taxed
c. the product provides a positive externality
d. the product is overproduced at the privately determined equilibrium
e. in time the product will not be produced
For a typical person who is currently earning a low wage rate, the
a. substitution effect of a wage rate increase usually is stronger than the income effect
b. substitution effect of a wage rate increase usually is weaker than the income effect
c. income effect of a wage rate increase is usually zero
d. substitution effect of a wage rate increase is usually zero
e. substitution and income effects of a wage rate increase tend to work in the same
direction
Which of the following statements regarding labor supply is false?
a. Jerry’s labor supply curve can bend backward if the income effect of a higher wage
rate outweighs the substitution effect.
b. Bob’s labor supply curve will not bend backward if the wage rate is never so high
that the income effect outweighs the substitution effect.
c. If there is a wage rate above which the income effect is at least as great as the
substitution effect, the labor supply curve will be vertical or bend backward.
d. The labor supply curve will slope upward if the income effect dominates the
substitution effect.
e. Hayden’s offer to work more hours as the result of a wage increase suggests that the
substitution effect dominates the income effect.
In which of the following situations will the effect upon the equilibrium price of wheat
be indeterminate?
a. supply decreases and demand increases
b. demand decreases and supply increases
c. demand remains constant and supply increases
d. supply decreases and demand decreases
e. supply remains constant and demand increases
Game theory is used in a number of areas in economics. What is the primary reason that
it is used in analyzing oligopoly type market structures?
a. The firms are producing a similar product
b. The firms are producing differentiated products
c. The demand curve facing the oligopolistic firms is perfectly inelastic
d. The mutual interdependence of firms in industries with a small number of firms
e. The demand curve the oligopolistic firm faces is downward sloping
Which of the following statements about demand is true?
a. Since most college students want a Mercedes sports coupe, their demand for it is
high.
b. If price increases, the demand curve shifts to the right.
c. The demand curve for bacon will not shift when the price of bacon changes.
d. If a supply curve shifts, thereby changing the price, the demand curve will shift as
well.
e. If a demand curve shifts, the supply curve will shift as well, whether or not the price
changes.
Exhibit 4-16
Refer to exhibit 4-16. The market demand curve is given by D1 and the supply by S1.
Equilibrium price is P2 and equilibrium quantity is Q1. What will the new equilibrium
price and quantity be if there is an increase in the birth rate?
a. P2 and Q1
b. P1 and Q2
c. P3 and Q4
d. P2 and Q2
e. P4 and Q3
A rational decision maker will take only those actions for which the expected marginal
benefit
a. is positive
b. is at its maximum level
c. is greater than or equal to the expected marginal cost
d. is less than the expected marginal cost
e. exactly equals the expected marginal cost
The existence of scarcity as defined by economists means that
a. societies are inefficiently organized
b. people are irrational
c. societies must make choices of how to use their resources
d. resources are non-renewable
e. people are greedy
Exhibit 6-2
Consider Exhibit 6-2 which shows the marginal utility of consuming milk. The total
utility from 3 glasses of milk is
a. 25 units of utility
b. 30 units of utility
c. 35 units of utility
d. 65 units of utility
e. 90 units of utility
Government allocation of pollution rights cannot be efficient if polluters cannot be
easily identified and monitored.
a. True
b. False
Economics
a. studies human behavior when scarcity exists and choices must be made
b. provides the only reasonable explanation of how people make decisions
c. can accurately explain all human behavior since it is based on the assumption of
rationality
d. is better at showing the way things ought to be than the other social sciences are
e. is the only social science that can explain the existence and behavior of public
institutions
Which of the following is a positive statement?
a. An unemployment rate of 7 percent or higher is a national disgrace.
b. Unemployment is a less important problem than inflation.
c. When the national unemployment rate is 7 percent, the unemployment rate for
inner-city youth is often close to 40 percent.
d. Unemployment and inflation are equally important problems.
e. An inflation rate of 7 percent is too high.
The supply curve will be more elastic if
a. the good has few substitutes
b. the time the producer has to adjust is long
c. the time frame for adjusting to price changes is short
d. demand is elastic
e. demand is inelastic
In recent decades, international trade has been
a. a constant percentage of U.S. GDP
b. a declining fraction of U.S. GDP
c. an increasing fraction of U.S. GDP
d. declining as measured by total dollars spent
e. constant as measured by total dollars spent
Exhibit 4-11
Refer to the supply curve in Exhibit 4-11. If the price increases from P to P”, quantity
supplied will
a. increase
b. The answer can only be determined with numbers to analyze.
c. stay the same
d. drop to zero
e. decrease