In the long run, price elasticities of demand are usually ____.
a. less than they are in the short run because people can adjust
b. the same as they are in the short run because tastes don’t change
c. greater than they are in the short run because prices rise over time
d. less than they are in the short run because real prices fall over time
e. greater than they are in the short run because consumers have time to adjust
If equilibrium is present in a market:
a. there is either a shortage or a surplus.
b. the quantity demanded equals quantity supplied.
c. the quantity demanded exceeds quantity supplied.
d. the quantity supplied exceeds quantity demanded.
As more Big Macs are consumed each day, the marginal utility that a person gets from
each additional Big Mac:
a. rises at a steady rate.
b. decreases.
c. remains constant.
d. accelerates.
Which of the following would cause a consumer to purchase less of a good when the
price of the good rises?
a. The income effect
b. The substitution effect
c. Both a and b
d. Neither a nor b
One of the problems created by price floors set above the equilibrium is:
a. consumers complain about high prices.
b. firms don’t have incentives to reduce costs.
c. the creation of surplus.
d. how to cope with the shortages.
e. the impact on firm profitability.
Exhibit 2-11 Production possibilities curves
In Exhibit 2-11, which of the following could have caused the production possibilities
curve of an economy to shift from the one labeled A to the one labeled B?
a. A major natural disaster
b. An increase in consumption goods production this year
c. An advance in technology
d. An increase in unemployment
e. A decrease in consumption goods production this year
Which of the following statements best describes the price, output, and profit conditions
of monopoly?
a. Price will equal marginal cost at the profit-maximizing level of output and profits
will be positive in the long run.
b. Price will always equal average variable cost in the short-run and either profits or
losses may result in the long run.
c. In the long run, positive economic profit will be eliminated.
d. None of these.
If the federal government placed a 50 cent per pack excise tax on cigarette
manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up
by 40 cents, the:
a. actual burden of this tax falls mostly on consumers.
b. actual burden of this tax falls mostly on manufacturers.
c. actual burden of the tax would be shared equally by producers and consumers.
d. tax would clearly be a progressive tax.
Which of the following is the best description of the effects of an increase in the supply
of bread?
a. Consumers will pay more for bread.
b. Bread prices will fall, and bread sales will rise.
c. A permanent surplus of bread will remain on the market.
d. Bakers will have higher marginal costs.
In a Lorenz curve diagram, the 45 line represents:
a. perfect income equality.
b. zero inflation.
c. a negative income tax.
d. an extremely unequal distribution of income.
Exhibit 6-7 Marginal utility for sandwiches and sodas
Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income
is $5, Marian should buy ____ sandwiches and ____ sodas.
a. five; zero
b. four; one
c. three; two
d. two; two
e. one; four
The city of Logan Square needs $40 million for a network of streetlights. There are
20,000 residents in the Logan Square neighborhood, meaning the cost for each resident
is $2,000. Psychiatrist Denise Miller refuses to donate $2,000 towards the project. This
is an example of the problems encountered with:
a. consumer goods.
b. capital goods.
c. rival goods.
d. public goods.
e. private goods.
The highest fifth of all families receive approximately ____ of the distribution of annual
money income among families.
a. 5 percent
b. 10 percent
c. 25 percent
d. 50 percent
Exhibit 1A-9 Multi-curve graph
Exhibit 1A-9 represents a three-variable relationship. As the annual income of
consumers falls from $50,000 (line A) to $30,000 (line B), the result is a:
a. rightward movement along each curve.
b. leftward movement along each curve,.
c. leftward shift in curve A to curve B.
d. rightward shift in curve A to curve B.
Suppose the fixed cost of building a nuclear power plant is $1 billion. Suppose also that
the only variable cost is the labor of Homer Simpson, and he earns $10 per hour. If the
plant generates 1,000 kilowatts each hour, and has already generated 1 billion kilowatts,
what can you say about the marginal cost of the next kilowatt?
a. b and e.
b. The marginal cost is equal to $.01.
c. The marginal cost is equal to $1.01.
d. The marginal cost is rising.
e. The marginal cost is falling.
According to the classification in the text, which of the following is not an industrially
advanced country (IAC)?
a. United Arab Emirates.
b. Israel.
c. Greece.
d. All of the above are IACs.
e. None of the above are IACs.
Exhibit 2-9 Production possibilities curve
If the economy represented in Exhibit 2-9 is operating at Point W:
a. no tractor product must be forgone to produce more food in the current period.
b. resources are not fully used.
c. some tractor production must be forgone to produce more food in the current period.
d. increased food production would be impossible.
If a firm has a tying agreement with a distributor which substantially lessens
competition, then it is likely to be in violation of the:
a. Clayton Act.
b. Robinson-Patman Act.
c. Sherman Antitrust Act.
d. Federal Trade Commission Act.
e. Interstate Commerce Act.
Exhibit 11-4 Supply and demand curves for food servers
If the equilibrium wage rate in Exhibit 11-4 increased, the cause could be that:
a. the supply of labor increased.
b. the demand for labor decreased.
c. either the demand for labor increased or the supply of labor decreased.
d. none of these.
Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC =
10. This firm is:
a. making an economic profit of 10.
b. an example of monopolistic competition.
c. going to go out of business in the long run.
d. a monopolist for a product with a relatively inelastic demand.
e. perfectly competitive in long-run equilibrium.
The Celler-Kefauver Act was passed because the Clayton Act had not been effective
against mergers.
In economics, the term ‘shortage” means that the quantity demanded is greater than the
quantity supplied at the existing price.
Utils are used by economists to measure the satisfaction a person obtains from
consuming a good.
Producer surplus measures the value between the actual selling price and the
profit-maximization price.
If a vacation in Paris is a normal good, other things being equal, an increase in
consumer income will increase the demand for travel to Paris.
If the supply curve decreases while the demand curve remains unchanged, the
equilibrium price would decrease.