A firm that minimizes average cost will not survive in the long run.
a. True
b. False
Marginal revenue product is obtained by multiplying the price of the product by the
marginal resource cost.
a. True
b. False
If you buy a good, its expected marginal value to you
a. is equal to its price
b. is greater than its price
c. is less than its price
d. may be less than or equal to but not greater than its price
e. may be greater than or equal to but not less than its price
Which of the following is not an example of an institution (rules of the game)?
a. formal rules of behavior
b. government takeover of private corporations
c. a constitution
d. informal constraints on behavior
e. traditions
Exhibit 5-6
We can tell that demand is elastic as price falls between point a and point b in Exhibit
5-6 because
a. quantity demanded is increasing
b. total revenue is increasing
c. total revenue is decreasing
d. total revenue is unchanged
e. the demand curve slopes downward
Which of the following events is likely to reduce the demand for on-campus student
housing?
a. a rise in rents for off-campus housing
b. more students enrolling at the university
c. it becomes less fashionable to live “on campus”
d. a rise in dorm fees
e. a rise in the incomes of students
Most waste generated in the U.S. ends up in landfills because
a. the low opportunity cost of time discourages recycling
b. Americans earn low incomes
c. the price of land is relatively low
d. the low wages in the repair industry encourages repairs
e. of low productivity and high wages in the waste disposal industry
Which of the following is the fundamental resource that is the basis of labor?
a. capital
b. natural resources
c. time
d. money
e. entrepreneurial ability
In defending itself against the government’s antitrust action, Microsoft argued that it did
not have a high market share.
a. True
b. False
A realized capital gain is
a. the difference between the price of a share of stock and what the investor paid for it
(i.e., the broker’s fee)
b. the difference between the original value of a piece of equipment and its depreciated
value
c. an increase in the net worth of a sole proprietorship or partnership
d. an increase in the market value of a share of stock held by an individual
e. the difference between the selling price and the purchase price of a share of stock
Your friend notices that U.S. auto production and U.S. population growth have moved
together over several decades. He reasons that one way to slow population growth is for
the government to order the auto makers to cut back on production. You gently point
out to him that he
a. is correct only when the economy is in a recession
b. has mistakenly inferred causation from observed correlation
c. has ignored secondary effects
d. has committed the fallacy of composition
e. is correct only when the United States enjoys economic growth
A problem with official U.S. poverty data is that they
a. omit the rural poor
b. do not account for inflation
c. omit in-kind transfers such as food stamps
d. do not reflect changes in the cost of living
e. omit dividends and interest
Because it is small relative to the market, a perfectly competitive firm faces an inelastic
demand curve for its output.
a. True
b. False
According to a 2011 PayScale.com survey, the college major whose median earnings
showed the biggest increase from workers with 0-5 years of experience to workers with
10-20 years of experience was:
a. Economics
b. Criminal Justice
c. Mathematics
d. Mechanical Engineering
e. History
Someone who committed the association-is-causation fallacy might conclude that
a. event B, which follows event A, was caused by the event A
b. event B, which follows event A, was not necessarily caused by event A
c. the simplest model is the best predictor
d. what is true for the individual is also true for the group
e. what is true for the individual is not necessarily true for the group
Exhibit 1-5
In Exhibit 1-5, curve B has a __________ slope that is __________ at every point.
a. positive; constant
b. positive; changing
c. negative; constant
d. negative; changing
e. changing; constant
The 100 largest U.S. firms currently control
a. about half of all manufacturing assets in the United States, which represents a
decrease since World War II
b. about half of all manufacturing assets in the United States, which represents an
increase since World War II
c. about half of all manufacturing assets in the United States, which represents no
change since World War II
d. about 40 percent of all manufacturing assets in the United States, which represents a
decrease since World War II
e. about 40 percent of all manufacturing assets in the United States, which represents an
increase since World War II
Which of the following will increase the supply of vanilla ice cream?
a. an increase in the price of vanilla beans (an ingredient in ice cream)
b. a decrease in the sales tax on restaurant bills
c. an increase in the price of chocolate ice cream
d. a decrease in the price of milk (an ingredient in ice cream)
e. an increase in the price of hot fudge
Total revenue is maximized where demand is inelastic.
a. True
b. False
Recognizing the incentive power of property rights and markets, some of the most
die-hard central planners are now allowing
a. more influence from custom or religion
b. family relations to play significant roles
c. a role for markets
d. communal ownership of property
e. inefficient use of resources
The procedure of determining the present value of payments to be received in the future
is known as
a. compounding
b. amortizing
c. perpetuating
d. nominalizing
e. discounting
A nation’s producers can compete effectively with imports from other nations if it has
a. high wages
b. low wages
c. low labor cost per unit of output
d. less specialization
e. low labor productivity
A perfectly competitive firm will produce at an economic loss in the short run rather
than discontinue production if there is a rate of output at which
a. marginal revenue equals marginal cost
b. total revenue equals total cost
c. total revenue exceeds total cost
d. total revenue exceeds total fixed cost
e. total revenue exceeds total variable cost
If the market interest rate increases, then
a. the cost of borrowing increases and so saving falls
b. the opportunity cost of consuming a good in the future increases and saving,
therefore, increases
c. the opportunity cost of consuming a good in the future increases and saving,
therefore, falls
d. the reward for saving diminishes and so present consumption increases
e. the reward for saving increases and so saving increases
If Ripco owns the building where it operates, then if
a. the firm pays no rent, there is no opportunity cost
b. the firm does not rent the building to anyone else, there is no opportunity cost
c. the firm pays no rent, there is an opportunity cost
d. its usage of the building precludes it from renting to anyone else, there is an
opportunity cost
e. the firm could use the building for other things, there is no opportunity cost
Assume that black beans and rice are staples in the diet of one particular family. How
could you tell if these goods were complements, substitutes, or unrelated goods?
a. If the price of black beans rose and the consumption of rice remained the same, they
would be substitutes.
b. If the price of black beans rose and the consumption of rice increased, they would be
substitutes.
c. If the price of black beans rose and the consumption of rice decreased, they would be
substitutes.
d. If the price of black beans rose and the consumption of both goods remained the
same, they would be complements.
e. There is no way to determine whether these goods are complements, substitutes, or
unrelated goods.
Exhibit 8-5
Consider Exhibit 8-5. If the market price is $21, this perfectly competitive firm will
a. earn a profit of $3.00
b. earn a profit of $2
c. earn a profit of $1
d. suffer a loss of $10
e. break even
The perfectly competitive firm’s short-run supply curve is the same as the
a. supply curve of all other firms in the industry
b. upward-sloping portion of its marginal cost curve
c. upward-sloping portion of its marginal cost curve at or above minimum average
variable cost
d. upward-sloping portion of its average variable cost curve
e. market demand curve
Exhibit 14-3
In Exhibit 14-3, if Jira gathers an amount of information equal to 15 minutes,
a. she has made the optimal search
b. she has avoided the cost of acquiring information
c. she has searched too much
d. further information will be costless to her
e. she should increase her search
If price is less than its minimum average variable cost, a perfectly competitive firm that
continues to produce in the short run
a. cannot cover any of its variable cost
b. incurs a loss greater than its fixed cost
c. can cover all of its fixed cost and some of its variable cost
d. can cover all of its variable cost and some of its fixed cost
e. can cover both its fixed costs and its variable cost
A major disadvantage of the corporate form of business is limited liability.
a. True
b. False