Levying a tax on a good when demand is very elastic will generate a large amount of
tax revenue for the government.
a. True
b. False
A production possibilities frontier will shift inward if there is more unemployment of
labor.
a. True
b. False
A firm’s marginal rate of return on investment curve shows the amount
a. saved by the firm at each alternative interest rate
b. invested by the firm at each alternative interest rate
c. saved by the firm at each alternative rate of time preference
d. invested by the firm at each alternative marginal resource cost
e. saved by the firm at each alternative marginal revenue product of investment
Laura Kaid owns a business and is willing to invest in capital until, at the margin, her
investment yields a cash stream with a present value less than the marginal cost of the
investment.
a. True
b. False
Exhibit 5-8
In Exhibit 5-8, which of the following statements is true at a quantity of 10?
a. Demand is elastic.
b. Demand is inelastic.
c. Demand is unit elastic.
d. We cannot tell anything about elasticity of demand because this is a total revenue
curve.
e. Demand is perfectly elastic.
If an employment situation is characterized by adverse selection, there is an excess
supply of underqualified applicants for each job.
a. True
b. False
The demand for a good is elastic if
a. an increase in price leads to a decrease in total revenue
b. an increase in price leads to an increase in total revenue
c. an increase in price causes no change in total revenue
d. total revenue is maximum
e. total revenue is minimum
Negative cross-price elasticity of demand indicates that
a. the product is an inferior good
b. the product is a necessity
c. the product is a luxury
d. the two products are substitutes
e. the two products are complements
If the demand for swordfish is price elastic and the price of swordfish increases, then
a. the quantity of swordfish demanded will increase
b. the total revenue from swordfish sales will decrease
c. the total revenue from swordfish sales will increase
d. the total revenue from swordfish sales will not change
e. whether total revenue rises or falls depends on how much the price of swordfish
increases
Suppose that a price-discriminating monopolist divides its market into two segments. In
each market segment, price is determined by finding the level of output where that
market’s
a. average revenue equals average total cost
b. average revenue equals average variable cost
c. marginal revenue equals average total cost
d. marginal revenue equals marginal cost
e. marginal cost equals average total cost
Which of the following is an example of an open-access resource?
a. a city subway system
b. a college education
c. an elementary school education
d. whales in the ocean
e. pandas in the zoo
The marginal cost curve intersects the minimum point of the average variable cost
curve.
a. True
b. False
If Joe says that nothing comes close to a Pepsi, his demand for Pepsi is likely to be
a. relatively price elastic
b. relatively income elastic
c. relatively price inelastic
d. unit elastic
e. infinitely elastic
Which of the following would shift the supply curve for CDs to the right?
a. a decrease in the price of materials used to make CDs
b. a rise in the cost of labor used to make CDs
c. an increase in the price of audio cassettes
d. a decrease in the number of suppliers
e. an increase in the price of CDs
A cottage industry is one that
a. produces rural housing
b. takes advantage of the division of labor
c. uses highly specialized resources in a complex production process
d. produces cottage cheese
e. carries out production in workers’ homes
One flaw of pure capitalism is that a person who owns no resources could starve.
a. True
b. False
A firm that produces where the isocost line is tangent to an isoquant line must be
a. maximizing profit
b. maximizing revenues
c. minimizing the total cost of producing that output level
d. minimizing output for a given total cost
e. paying the same prices for capital and labor
If the cross-price elasticity of demand is -3, then the goods are __________ and the
consumers’ responsiveness would be characterized as __________.
a. substitutes; inelastic
b. substitutes; elastic
c. substitutes; unit elastic
d. complements; inelastic
e. complements; elastic
The statistical discrepancy in the balance of payments
a. is always positive
b. is always negative
c. is always zero
d. is either positive, negative, or zero
e. is indeterminate
The market interest rate
a. represents the opportunity cost of investing with borrowed funds
b. has no impact on the firm’s investment decision if the firm uses borrowed funds
c. represents the opportunity cost of investing with savings
d. has no impact on the firm’s investment decision if the firm uses savings
e. represents the opportunity cost of investing with either borrowed funds or savings
A candy bar sells for 50 cents, 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. Ann’s income must be
a. $3
b. $6
c. $12
d. $24
e. $36
Exhibit 9-16
Exhibit 9-16 depicts the cost and demand conditions facing a profit-maximizing
monopolist that does not price discriminate. What is the deadweight loss in this
situation?
a. $5
b. $250
c. $125
d. $500
e. $10
Money facilitates trade because
a. it eliminates the need for specialization
b. it prevents people from taking advantage of each other
c. it serves as a medium of exchange
d. division of labor allows money to be produced at a lower cost
e. people do not benefit from barter unless money is used
Suppose that with two fro-yo machines, 12 workers produce eight quarts of fro-yo. If
the marginal product of the thirteenth worker is two quarts, then
a. thirteen workers produce ten quarts
b. thirteen workers produce two quarts
c. the thirteenth worker alone produces ten quarts
d. the law of diminishing returns cannot be operating in this example
e. diminishing returns must begin with the thirteenth worker
When sellers have more information about hidden characteristics of a good than buyers
have, more low-quality units are likely to be sold than high-quality units. This is
a. the law of diminishing marginal returns
b. the law of natural selection
c. the winner’s curse
d. the lemons problem
e. the problem of common pools
Exhibit 19-1
Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda
and Beta for fish and coconuts. What is the opportunity cost of a coconut in Beta?
a. 1/2 fish
b. 1 fish
c. 2 fish
d. 21/2 fish
e. cannot tell from the information provided
Rent-seeking activities are socially wasteful because they use scarce resources but do
not add to society’s output.
a. True
b. False
Rent controls mean that tenants end up with the best possible housing choices over the
long run.
a. True
b. False
Accounting profit equals
a. explicit costs minus implicit costs
b. economic profit minus implicit costs
c. economic profit minus explicit costs
d. economic profit minus explicit costs and implicit costs
e. economic profit plus implicit costs
Special-interest legislation that imposes costs broadly over many taxpayers can be
enacted because
a. taxpayers benefit from this type of legislation
b. taxpayers remain rationally ignorant of the legislation
c. only the wealthy pay these taxes
d. these taxes are actually borne by a minority of taxpayers
e. the Constitution requires special-interest legislation