You and your brother are splitting a piece of cake. You cut it into two pieces and your
brother selects his piece first. Thus, you cut it into two equally sized pieces. This is an
example of ________.
A) utilitarian justice
B) Rawlsian justice
C) communism
D) a public good
If it is ________ to make person A better off ________ making person B worse off,
then the distribution of goods must be inefficient.
A) impossible; without
B) possible; without
C) possible; while
D) All of the above answers are correct.
Figure 17.2
Refer to Figure 17.2. Suppose Sam’s utility from income is given in the diagram. From
this we would say that Sam is ________.
A) risk neutral
B) risk loving
C) risk averse
D) a risk taker
Assume the wool industry is perfectly competitive. The market demand curve for wool
is ________ and each individual wool producer’s demand curve is ________.
A) downward sloping; horizontal
B) horizontal; downward sloping
C) horizontal; horizontal
D) downward sloping; downward sloping
Society will produce the efficient mix of output if all firms equate
A) price and marginal cost.
B) price and average total cost.
C) marginal cost and average total cost.
D) price and marginal revenue.
Resources are allocated efficiently when
A) the market produces what people want.
B) economic profits are zero.
C) output is distributed in an equitable fashion.
D) output is produced in a sustainable fashion.
A lawn service company has the following production possibilities. With one, two,
three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day,
respectively.
The average product of labor with four workers is
A) 3
B) 5
C) 4
D) 14
The demand for any factor of production in a competitive industry depends on
A) its productivity and upon how its product is valued in the marketplace.
B) its productivity and the productivity of all other inputs.
C) the productivity of all the other inputs and how these inputs are valued in the
marketplace.
D) the amount of the factor that is used and the amounts of all the other factors that are
used.
In the short run,
A) all firms that earn a loss will shut down.
B) if current firms are earning a profit, new firms will enter the industry.
C) firms act to minimize losses or maximize profits.
D) All of the above are correct.
If a profit maximizing firm is currently producing where MR = MC, it should
A) increase output so that marginal revenue is less than marginal cost.
B) decrease output so that marginal revenue will be greater than marginal cost and the
firm’s profit will increase.
C) not change because it is already maximizing profit.
D) exit the industry.
The idea of utilitarian justice was first proposed by ________.
A) John Stuart Mill
B) John Rawls
C) Karl Marx
D) None of the above is correct.
Figure 2.6
Refer to Figure 2.6. Which of the following is most likely to shift the production
possibility frontier from ppf2 to ppf1?
A) a change in consumer tastes
B) the purchase of government Treasury bills
C) moving resources from consumer goods to capital goods
D) a decrease in the general educational level of the population
Cashews are measured in bushels and tea is measured in pounds (lbs.)
Table 20.2
Refer to Table 20.2. In India, the opportunity cost of
A) a bushel of cashews is 6 lbs. of tea.
B) a lb. of tea is 1/6 of a bushel of cashews.
C) a bushel of cashews is 5 lbs. of tea.
D) a lb. of tea is 1/5 of a bushel of cashews.
________ of income redistribution argue that redistribution ________ those who,
through no fault of their own, are unable to earn an adequate income.
A) Opponents; harms
B) Opponents; helps
C) Proponents; harms
D) Proponents; helps
The XYZ Computer Company has a monopoly over the production of a specialized
color printer. The XYZ Computer Company will find it profitable to reduce output as
long as marginal revenue
A) is greater than marginal cost.
B) equals marginal cost.
C) is less than marginal cost.
D) is positive.
If marginal product is less than average product, then
A) average product must be increasing.
B) marginal product must be decreasing.
C) marginal product must be increasing.
D) marginal product could either be increasing or decreasing.
In college you practically existed on instant noodles, but now you earn $95,000 a year.
You never want to see instant noodles again. We can safely conclude that you consider
instant noodles to be a(n)
A) normal good.
B) complementary good.
C) luxury.
D) inferior good.
In the Cournot model, when a new firm begins production it assumes its demand curve
is
A) the market demand less the amount the other firm is selling.
B) the market demand plus the amount the other firm is selling.
C) the same as the competing firm’s demand curve.
D) one-half of the competing firm’s demand curve.
Market signals are
A) actions taken by buyers and sellers to communicate quality in the presence of perfect
information.
B) only strong if obtaining the signal is more costly for individuals with valued traits
than for those with non-valued traits.
C) used to differentiate those who will drive equally carefully whether or not they have
auto insurance from those who drive less carefully when they have insurance.
D) used to distinguish between high and low quality and help correct the adverse
selection problem.
Table 19.1
Relating to the Economics in Practice on page 392: Refer to Table 19.1. The tax rate
structure in this example is
A) proportional.
B) progressive.
C) regressive.
D) marginal.
Figure 5.6
Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts
from S1 to S2. Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity supplied to exceed 12
thousand pizzas.
B) There is no need for price to serve as a rationing device in this case because the new
equilibrium quantity exceeds the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity demanded to fall from 12
to 10 thousand pizzas.
D) The market cannot move to a new equilibrium until there is also a change in
demand.
You have decided that you want to attend a renaissance fair as King Henry VIII. You
estimate that it will cost $80 to assemble your costume. After spending $80 on the
costume, you realize that the additional pieces you need will cost you $20 more. The
marginal cost of completing the costume is
A) $20.
B) $60.
C) $80.
D) $100.
________ occurs when the economy is producing what people want at least possible
cost.
A) Efficiency
B) Equity
C) Stability
D) Maximum profit
When there is a shortage of a product in an unregulated market, there is a tendency for
A) price to rise.
B) price to fall.
C) quantity demanded to increase.
D) quantity supplied to decrease.
Figure 6.2
Refer to Figure 6.2. Assume Mr. Lingle is on budget constraint AC. If the price of a
gardenburger is $6, Mr. Lingle’s monthly income is
A) $24.
B) $60.
C) $200.
D) $240.
Equilibrium in this market occurs at the intersection of curves S and D.
Figure 4.6
In figure 4.6 at equilibrium, consumer surplus is area
A) A.
B) A+B+C.
C) G.
D) E+F+G.
Which of the following is NOT an assumption of the Cournot model presented in the
text?
A) There are two firms in an industry.
B) Each firm takes the output of the other firm as given.
C) Both firms maximize profits.
D) If the first firm cuts price, the second firm will follow and if the first raises price, the
second will not follow.
If the average tax rate exceeds the marginal tax rate, the tax would be
A) proportional.
B) regressive.
C) progressive.
D) uniform.
Predatory pricing occurs when a large, powerful firm drives smaller firms out of the
market by
A) permanently selling at an artificially high price.
B) permanently selling at an artificially low price.
C) temporarily selling at an artificially high price.
D) temporarily selling at an artificially low price.
One of the most successful countries in implementing export promotion policies is
A) the United States.
B) Germany.
C) China.
D) Japan.
Equilibrium in this market occurs at the intersection of curves S and D.
Figure 4.6
In figure 4.6 if price is P1, producer surplus is area
A) A.
B) A+B+E.
C) G.
D) B+E+G.
What is Pareto optimality?
Boyd Manufacturing operates in a perfectly competitive market. The firm recently
purchased a new structure with an expected rate of return of 18 percent. If the market
rate of interest is 10 percent, was the firm’s decision to purchase the structure a wise
one? Explain.
Provide an economic explanation for why government subsidization of child
immunizations may lead to a more efficient outcome.
What role can the government play in correcting problems of imperfect information?
What is a dominant strategy?
If a lower exchange rate spurs exports then why wouldn”t it be a good idea of
policymakers to intervene to push the exchange rate as low as they can?
What does it mean for a good to be non-rival in consumption?
Some states require that unions represent non-union workers who don”t pay dues in
their collective bargaining negotiations. Explain using economic logic how this might
result in fewer unions than would otherwise be the case if these types of laws did not
exist.
The price elasticity of demand for new stereos is “2. Suppose a stereo store wishes to
increase its sales by 15 percent. What should the firm do?
Some people will often remark that the used car market is a counter-cyclical business,
meaning that the fortunes of the business tend to move in the opposite direction of the
health of the economy. Why might this be true and what conclusion can you make about
what kind of a good used cars would be classified as economically speaking?
What is the conclusion that behavioral economists have made about the amount of
product variety in the market place?
The equation for the firm’s total variable costs is given by TVC = 5q. The firm’s total
fixed costs are $10. What is the equation for the firm’s TC curve? Draw the firm’s TVC,
TFC, TC, MC, AVC, and ATC cost curves. Does the firm’s cost curve have the usual
shape? Why or why not?
What is a pure monopoly?
Assume two nations are involved in an arms race. They both assume that each faces two
choices ” sign disarmament accord or continue with military expansion and the building
of more nuclear missiles. Explain using the prisoner’s dilemma model why both of these
nations will choose to escalate the arms race rather than choose bilateral disarmament.
During the Cold War President Ronald Reagan was quoted as saying that the United
States will “trust, but verify” when discussing nuclear nonproliferation agreements
between the U.S. and the Soviet Union. How does this relate to your answer to the first
part of this question?
The table below represents cost data for Matters & Sons which sells paper plates in a
perfectly competitive market for a price of $2 per package:
How many units of the output will this firm produce? How much profit will it earn?
Will the firm choose to operate in the short run? Will the firm choose to operate in the
long run? Explain.