________ is on the World Bank’s list of low-income countries, yet its capital city is one
of the top ten centers of commerce in the world.
A) India
B) Mexico
C) Rwanda
D) Thailand
Chronic food shortages, explosive population growth, and hyperinflations are problems
facing
A) industrial countries.
B) first world countries.
C) developing countries.
D) developed countries.
Table 11.1
Refer to Table 11.1. If the interest rate is 2.5%, Nashbar Bicycle should
A) fund all of the projects.
B) not fund any of the projects.
C) fund only the employee fitness center.
D) fund all of the projects except for the employee fitness center.
Figure 17.2
Refer to Figure 17.2. Fiona has two job offers when she graduates from college. Fiona
views the offers as identical, except for the salary terms. The first offer is at a fixed
annual salary of $60,000. The second offer is at a fixed salary of $20,000 plus a
possible bonus of $80,000. Fiona believes that she has a 50-50 chance of earning the
bonus. If Fiona takes the offer that maximizes her expected utility and she is risk
neutral, then
A) she will take the first offer.
B) she will take the second offer.
C) she is indifferent between the offersboth yield the same expected utility.
D) Indeterminate from the given informationwe cannot say what she will do.
Figure 5.2
Refer to Figure 5.2. If the price of a hamburger decreases from $4 to $2, the price
elasticity of demand equals ________. Use the midpoint formula.
A) -0.33
B) -2.0
C) -3.0
D) -5.0
Figure 8.7
Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is
A) $3.
B) $51.
C) $153.
D) $204.
Assume the total product of two workers is 200 and the total product of three workers is
300. The three workers’ average product is ________ while the third worker’s marginal
product is ________.
A) 80; 40
B) 40; 80
C) 100; 100
D) 300; 200
Figure 14.7
Refer to Figure 14.7. Four firms that produce chewing gum form a cartel. The cartel
faces the market demand curve given by D. At the profit-maximizing output, the total
cost for the cartel is
A) $3,000.
B) $3,720.
C) $4,800.
D) $5,600.
If the production of a good generates external benefits, the government could increase
efficiency by
A) taxing the production of the good to reduce the amount produced.
B) subsidizing production of the good to increase the amount produced.
C) regulating production of the good to reduce the amount produced.
D) requiring all producers of the product to be licensed to produce the product.
Figure 6.15
Refer to Figure 6.15. The slope of the indifference curve is the ratio of the ________
utility of ice cream cones to the ________ utility of ice cream sandwiches.
A) marginal; marginal
B) marginal; total
C) total; marginal
D) total; total
Suppose there is a permanent shift of consumer preferences away from pretzels and
toward potato chips. The most likely result would be
A) in the short run, economic losses in the potato chip market.
B) in the long run, a fall in the supply of potato chips.
C) in the short run, a rise in the price of pretzels.
D) short-run profits in the potato chip market increase.
In the labor market, contracts are often designed to include a variable salary component
that is tied to some measure of performance. Why?
A) Such contracts provide workers with the incentive to work hard.
B) Most people are risk-loving and thus variability in their compensation leads to
higher total utility.
C) Labor unions demand a variable salary component.
D) The variable component reduces wages paid by firms.
In which of the four oligopolistic markets below is there considerable price
competition?
A) music production industry
B) stent industry
C) airline industry
D) high-definition DVD industry
An approach to economics that applies statistical techniques and data to economic
problems is called
A) Ockham’s razor.
B) laissez-faire economics.
C) positive economics.
D) normative economics.
Figure 1.3
Refer to Figure 1.3. The slope of the line between Points A and B is
A) 5.
B) 67.
C) -0.67.
D) -1.5.
Relating to the Economics in Practice on page 332: If a company that is responsible for
an environmental disaster does not end up paying the entire cost of the damage it
created, the marginal social cost will be ________ the sum of the marginal costs of
production.
A) less than
B) greater than
C) equal to
D) unrelated to
In the year ________, the United States switched from running a trade surplus to
running a trade deficit.
A) 1950
B) 1966
C) 1976
D) 1994
Which of the following statements about asymmetric information is false?
A) Asymmetric information occurs when one party to a transaction has relevant
information to the transaction that the other party does not have.
B) Asymmetric information creates market failures because it makes it harder for
individuals to engage in transactions that in the presence of perfect information would
take place.
C) Asymmetric information can only be solved through government intervention.
D) Asymmetric information occurs in the market for used cars and in the insurance
market.
Suppose that the United States and Spain both produce cognac and handbags. In the
United States, cognac sells for $20 a bottle and handbags sell for $80. In Spain, cognac
sells for 30 euros a bottle and handbags sell for 40 euros. If the current exchange rate is
0.8 euro to the dollar, then
A) Spain will import both handbags and cognac from the United States.
B) the United States will import both handbags and cognac from Spain.
C) the United States will import handbags from Spain, and Spain will import cognac
from the United States.
D) the United States will import cognac from Spain, and Spain will import handbags
from the United States.
The economist Joseph Schumpeter argued that industrial concentration, in which a
relatively small number of firms control the market place, actually ________ the rate of
________.
A) increased; market competitiveness
B) increased; technological advance
C) decreased; market competitiveness
D) decreased; technological advance
________ holds that those with greater ability to pay should pay more.
A) The benefits-received principle
B) Horizontal equity
C) Vertical equity
D) Regressive tax theory
If the demand for macaroni and cheese decreases as income increases, macaroni and
cheese is a(n)
A) complementary good.
B) normal good.
C) inferior good.
D) substitute good.
Figure 3.16
Refer to Figure 3.16. The supply curve for hula hoops shifts from S0 to S1. This could
be caused by
A) an decrease in the price of hula hoops.
B) a decrease in the number of firms selling hula hoops.
C) a decrease in the demand for hula hoops.
D) either B or C.
The rise of the modern factory system in England during the late eighteenth and early
nineteenth centuries is known as the
A) Great Migration.
B) Industrial Revolution.
C) Wealth of Nations.
D) Dark Ages.
Which of the following is a microeconomics question?
A) Is it sensible for a government to subsidize tobacco production?
B) Why do some countries grow faster than others?
C) Should Congress and the president take action to reduce global warming?
D) Should the government attempt to influence the interest rate to lower inflation?
Firms earning a profit will want to ________ their profits in the short run while firms
suffering losses will want to ________ their losses.
A) maximize; maximize
B) maximize; minimize
C) minimize; maximize
D) minimize; minimize
________ demonstrates that an optimal (or most efficient) level of output exists for
every public good.
A) The Tiebout hypothesis
B) Samuelson’s theory of public expenditure
C) The Theory of Public Choice
D) The Coase theorem
Figure 13.3
Refer to Figure 13.3. This firm’s marginal revenue will be positive at
A) $9.
B) $3.
C) all prices.
D) prices between $4 and $8.
The burden of a proportional tax ________ as a percentage of income as income
________.
A) rises; falls
B) rises; rises
C) falls; falls
D) does not change; rises or falls
Firms have an incentive to substitute labor for capital as the
A) price of capital increases.
B) price of capital decreases.
C) price of labor increases.
D) marginal product of labor decreases.
Demand curves are derived while holding constant
A) income, tastes, and the price of the good.
B) only income and tastes.
C) income, tastes, and the prices of other goods.
D) only tastes and the price of other goods.
The condition P = MC implies that
A) there is no consumer surplus for any consumer.
B) an individual who values the product at more than P will receive consumer surplus.
C) an individual who values the product at less than P will receive consumer surplus.
D) the amount of consumer surplus is infinite.