Municipal bonds
a. are issued by state and local governments.
b. pay interest that is fully taxable.
c. are issued by corporations.
d. are issued by the federal government.
Refer to Exhibit 22-13.What dollar amounts go in blanks (T) and (U), respectively?
Exhibit 22-13 Quantity of Output (Q) Total Fixed Cost (TFC) Average Fixed Cost
(AFC) Total Variable Cost
a. $10; $10
b. $20; $50
c. $20; $30
d. $42; $40
e. There is not enough information to answer this question.
Refer to Exhibit 31-3. Suppose that Firms A, B, and C are the only polluters in the state
and that each emits 4 tons of pollution into the atmosphere. To cut the level of pollution
in half, the government mandates system whereby each firm must reduce its pollution
level by one-half. The total cost of complying with the mandate is
a. $433.
b. $1,540.
c. $2,750.
d. $8,570.
e. $11,650.
Supply curves are ________________ upward sloping.
a. always
b. usually
c. rarely
d. never
A price floor creates a situation in which one party wins and another party loses, and the
gains for the winner are equal to the losses for the loser.
a. True
b. False
When firm A hires one worker it pays $10 an hour and its total labor cost is $10. When
it hires a second worker, it has to pay $11 to each of its two workers and its total labor
cost is $22. When it hires a third worker, it has to pay $12 to each of its three workers
and its total labor cost is $36. For firm A,
a. its marginal factor cost is greater than the wage rate it pays, except for the first
worker it hires.
b. its marginal factor cost is greater than the wage rate it pays, except for the first two
workers it hires.
c. its supply curve of labor lies above its marginal factor cost curve.
d. it is likely that marginal revenue product is always greater than marginal factor cost.
e. none of the above
Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive
firm, MR = MC at 1,200 units of output. At 1,200 units, ATC is $23, and AVC is $18.
The best policy for this firm is to __________ in the short run. Also, this firm earns
__________ of __________ if it produces and sells 1,200 units.
a. shut down; losses; $15,600
b. shut down; losses; $9,600
c. continue to produce; losses; $15,600
d. continue to produce; profits; $15,600
Which of the following is usually discussed in the case against government?
a. special interest groups and transfers
b. the unintended effects of governments actions
c. removal from the prisoner’s dilemma
d. a and b
e. none of the above
Which of the following statements is true?
a. The traditional view of labor unions predicts that unionization of a firm will result in
improvements in productivity and efficiency.
b. The labor union as a collective voice view of labor unions predicts that unionization
of a firm will result in decreases in productivity and efficiency.
c. The traditional view of labor unions supports the formation of unions as a
counterweight to firms’ factor-hiring power.
d. The labor union as a collective voice view of labor unions supports efforts to
decrease the unions’ role as a “monopolizer of labor.”
e. none of the above
Suppose that one fixed and one variable input are used to produce good X. As the
marginal physical product of the variable input increases, the marginal cost
a. increases.
b. decreases.
c. remains constant.
d. There is not enough information to answer the question.
The longer the period of time allowed for the ___________ of a good to adjust to a
change in the price of the good, the ___________ the price elasticity of supply will
be.This statement assumes that the quantity supplied __________ be altered with time.
a. producer; higher; can
b. consumer; higher; can
c. producer; lower; can
d. producer; lower; cannot
An advance in technology in the production of good X causes
a. a rightward shift in the supply curve for good X.
b. a leftward shift in the supply curve for good X.
c. the supply curve for good X to change from upward sloping to vertical.
d. the supply curve for good X to change from vertical to upward sloping.
One implication of the median voter model is that candidates running for political office
take polls because
a. everyone does it.
b. they want to know if they should maintain their current positions or modify them.
c. it is good public relations, since if the public learns that the candidate is taking polls,
the public will feel that the candidate cares what it thinks.
d. taking polls is tax deductible.
e. none of the above
Refer to Exhibit 4-8.Suppose that wheat producerslobby the government for a price
floor and receive one.This price floor is set at PF.How many fewer units of wheat will
be sold at the price floor than at the equilibrium price?
Exhibit 4-8
a. Q2 – Q1
b. Q3 – Q2
c. Q3 – Q1
d. Q2
If, under a fixed exchange rate system, the dollar price of Mexican pesos is below its
equilibrium level, then the
a. dollar is undervalued.
b. peso is undervalued.
c. dollar has depreciated.
d. peso has appreciated.
e. a and c
Labor unions try to meet their objectives by influencing the elasticity of demand for
labor and the demand for labor. To influence these factors, they try to do all of the
following except
a. reduce the availability of substitutes for the product they produce.
b. reduce the availability of substitute factors.
c. increase demand for the product they produce.
d. increase substitute factor prices.
e. reduce the nonmoney benefits of substitute factors.
If a farmer rents the land he works on, then any price support or deficiency payments he
receives __________ capitalized into the value of that land, and so his economic profit
from farming __________.
a. are; goes to zero
b. are; remains positive
c. are not; goes to zero
d. are not; remains positive
The firm negotiates a new agreement with its workers for lower wages. The ATC curve
should be __________ and the AFC curve should be __________ after the agreement
goes into effect.
a. lower; lower
b. lower; unchanged
c. higher; higher
d. lower; higher
e. unchanged; lower
A state of rational ignorance
a. is a reflection of too little education.
b. makes sense only if information is a free good.
c. exists only in ideal representative democracies.
d. makes sense when the costs of becoming informed are greater than the benefits.
e. none of the above
Exhibit 22-8 shows how output varies with the only variable input used in its
production. The table indicates that diminishing marginal returns set in with the hiring
of which unit of labor?
a. first
b. second
c. third
d. fourth
e. fifth
Which of the following is usually considered a natural monopoly?
a. a major car manufacturer
b. a car stereo installer
c. overnight mail services
d. state universities
e. none of the above
A perfectly competitive market is initially in long-run competitive equilibrium. Then,
market demand falls. This causes the marginal revenue curves for existing firms to shift
__________ and for these firms to produce __________ output. Some of the existing
firms will end up __________.
a. upward, more, increasing their plant size
b. downward, less, exiting the market
c. downward, more, purchasing more capital equipment
d. upward, less, cutting fixed costs
e. none of the above