Most economics graphs reflect the relationship between how many economic variables?
a. three
b. two
c. four
d. thirty
e. twenty
Firms in a high-wage nation such as the U.S. can compete effectively with imports from
low-wage nations if
a. skill levels are identical in the nations
b. the U.S. reduces tariffs on imports
c. low-wage nations impose tariffs on U.S. made goods
d. labor productivity is higher in the low-wage nation
e. labor productivity is higher in the U.S.
A mixed capitalist economy is one in which
a. decisions are based primarily on religion or custom
b. all resources are publicly owned and economic planning is centralized
c. all resources are privately owned and prices are used to coordinate economic activity
d. resources are both publicly and privately owned and some markets are regulated
e. all resources are publicly owned and prices are used to coordinate economic activity
The losers when the United States institutes trade restrictions include
a. U.S. consumers of imported goods, U.S. producers who use imported intermediate
goods, and, if other countries retaliate, U.S. exporters
b. U.S. producers of goods that compete with imported goods only
c. U.S. consumers of imported goods and U.S. producers of goods that compete with
imported goods
d. all U.S. producers of all goods and U.S. exporters
e. only U.S. exporters
Which of the following is true for a perfectly competitive firm in the long run?
a. MR = MC = ATC
b. MR = MC = AFC
c. MC = ATC = AFC
d. MR = MC > ATC
e. MR = MC > AVC
Exhibit 9-8
At the profit-maximizing quantity in Exhibit 9-8, what is the level of profit?
a. $20
b. $30
c. $0
d. $70
e. $40
Wendy’s must decide whether to grow its own potatoes for French fries. Growing
potatoes is a very different process from running a fast-food restaurant. Based on this
information alone, should Wendy’s grow its own potatoes?
a. No, because Wendy’s managers have bounded rationality.
b. Yes, because Wendy’s managers have bounded rationality.
c. No, because there is a small number of potato suppliers.
d. Yes, because there is a small number of potato suppliers.
e. No, because it is easy to observe the quality of potatoes.
Exhibit 12-10
In Exhibit 12-10, which of the following is true between points a and b?
a. The income effect dominates the substitution effect.
b. The substitution effect dominates the income effect.
c. The income effect exactly offsets the substitution effect.
d. No labor is supplied.
e. There is no substitution effect.
Price discrimination will occur whenever a firm faces a downward-sloping demand
curve.
a. True
b. False
Exhibit 9-3
At the profit-maximizing quantity, the demand curve facing the firm in Exhibit 9-3 is
a. perfectly elastic
b. price elastic
c. price inelastic
d. unit elastic
e. perfectly inelastic
The yardstick most often used to compare living standards across nations is
a. average production cost per unit
b. sales revenue per month
c. utility per capita
d. GDP per person
e. imports per year
Suppose the local government is considering using marginal cost pricing to set rates for
a cable TV company. Which of the following arguments supports marginal cost pricing?
a. Marginal cost pricing gives the monopoly economic profit and a reason to stay in
business.
b. Marginal cost pricing gives the firm a normal economic profit and a reason to stay in
business.
c. Marginal cost pricing is allocatively efficient.
d. Average cost pricing requires subsidies, which can be costly.
e. Average cost pricing forces monopolies to operate at a loss.
Exhibit 14-3
In Exhibit 14-3, the point where the marginal cost of information is 0 and the amount of
information is 5 minutes worth is
a. the optimal amount of information gathered
b. common knowledge
c. the opportunity cost of the consumer’s time
d. adverse selection
e. that all information is costly
The increase in competition in the United States between 1958 and 1988 was not a
result of
a. increased imports
b. deregulation
c. antitrust activity
d. penetration of markets by foreign producers
e. import quotas
According to a 2011 PayScale.com survey, the college majors that have the highest
median earnings are ones that require quantitative and analytical skills.
a. True
b. False
Which of the following is true concerning unilateral transfers in the U.S. balance of
payments?
a. Unilateral transfers have been positive since World War II.
b. Unilateral transfers have been negative since World War II.
c. Unilateral transfers have been negative every year since World War II except during
the war in Iraq.
d. The United States places tight restrictions on moneys being sent out of the country.
e. Developing countries ordinarily place no restrictions on moneys being sent out of
their countries.
In the United States, all levels of government together spend about
a. one out of every three dollars paid for finished goods and services
b. half of the dollars paid for defense spending
c. the same amount as private citizens and corporations
d. one out of every three dollars paid for education
e. 80 percent of their budgets on transfer payments
Featherbedding is a union practice designed to increase employment of union members.
a. True
b. False
If Marie buys a sailboat, which increases the productivity of her leisure time, she
a. increases her productivity of nonmarket work
b. increases her productivity of market work
c. will spend less time in nonmarket work
d. will spend less time in leisure activities
e. will spend more time in market work to pay for the boat’s maintenance
An indifference curve slopes downward to the right because
a. more goods are preferable to less
b. goods are substitutes for each other
c. the consumer has a limited income
d. the opportunity costs of goods differ
e. of the budget constraint
If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity
demanded decreases from 100 cans to 50 cans, then, according to the midpoint formula,
the value of price elasticity of demand for Pepsi-Cola is
a. -0.5
b. -0.25
c. -1
d. -3
e. -2
Direct transfer programs are generally less efficient and less politically acceptable than
subsidy programs.
a. True
b. False
Exhibit 11-1
Condider Exibit 11-1. Each of the panels depict the supply and demand conditions in a
resource market. In panel (d) how much economic rent do the resources earn?
a. $0
b. $250
c. $500
d. $750
e. $1000
The purpose of experimental economics is to
a. provide empirical support for economic theories
b. test economic theories in a controlled environment
c. replace the lecture as the main method of economic education
d. allow economists to claim that they are scientists
e. determine the best ways to profit from the study of economics
Sharon wants a career as an accountant. During the summer she turns down a job
painting houses at $6 an hour to work in an accounting office for $4 an hour. Which of
the following would not explain her choice?
a. Accounting is more prestigious.
b. The summer accounting job will help her get a full-time job in accounting when she
graduates.
c. She prefers to work inside.
d. She would face the law of diminishing marginal utility if she had more goods.
e. She dislikes the messiness of painting.
If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is
a. perfectly elastic
b. elastic
c. unit elastic
d. inelastic
e. perfectly inelastic
If the managers of a theater plan to raise ticket prices to increase ticket revenues, then
they must believe that demand is
a. elastic
b. inelastic
c. unit elastic
d. perfectly elastic
e. income elastic
A guarded barbed wire fence separates East and West Bovinia. Soccer players are paid
twice as much in West Bovinia as in East Bovinia. This is an example of
a. inelastic supply
b. a temporary resource price differential
c. a permanent resource price differential
d. diminishing marginal revenue product
e. economic rent
Which of the following would lead a utility-maximizing consumer to search for
additional information?
a. an increase in income
b. an increase in the marginal cost of information
c. improved technology (e.g., Internet search programs)
d. a reduction in the dispersion of prices
e. an increase in the consumer’s wage rate
If a certain type of clothing becomes more fashionable, we would expect that its price
a. will decrease and quantity will remain constant
b. and quantity will both decrease
c. will increase and quantity will decrease
d. will decrease and quantity will increase
e. and quantity will both increase
A utility-maximizing consumer who is considering two goods, x and y, would allocate
her budget in such a way that
a. MUx = MUy
b. MUx > MUy
c. MUx/Px > MUy/Py
d. MUx/Px = MUy/Py
e. MUx/Px < MUy/Py
Claude’s Copper Clappers sells clappers for $60 each in a perfectly competitive market.
At its present rate of output, Claude’s marginal cost is $65, average variable cost is $25,
and average total cost is $62. To improve his profit/loss situation, Claude should
a. increase output
b. reduce output but not to zero
c. maintain the present rate of output
d. shut down
e. raise the price
Exhibit 13-2
One reason for the decline in output with the seventh machine in Exhibit 13-2 could be
that
a. the increase in the company’s power consumption when seven machines are being
used causes its electricity bills to be much higher
b. the increase in the company’s power consumption when seven machines are being
used causes fuses to blow more often
c. no one uses the seventh machine; only six are necessary
d. no one uses the seventh machine; only five are necessary
e. workers no longer have to wait in line to make copies because more machines are
available