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A $10 fee to obtain a driver's license is a
a. regressive tax.
b. degressive tax.
c. proportional tax.
d. progressive tax.
The federal government receives most of its revenue from three sources: personal
income tax, corporate income tax, and payroll tax.
a. True
b. False
If marginal revenue and marginal cost are not equal, profit can be maximized by
a. increasing output if MR > MC.
b. decreasing output if MC > MR.
c. moving to the output where the slopes of TR and TC are equal.
d. All of the above are correct.
Prohibiting the use of "dirty" fuels by industry is an example of
a. voluntarism.
b. direct controls.
c. taxes on emissions.
d. none of the above.
One problem that haunts most antitrust litigation is that:
a. the government seldom wins.
b. the appearance of vigorous competition resembles acts that undermine competition.
c. it has the effect of preventing firms from being tough on their rivals.
d. the defendant firm may be destroyed.
The kinked demand curve model is based on the assumption that rival firms will match
a price cut but ignore a price increase.
a. True
b. False
One of the reasons for the growth performance of free market economies is firms' use of
innovation to compete with one another.
a. True
b. False
One advantage of emissions permits is that they allow the government to choose the
level of pollution reduction.
a. True
b. False
As Americans have become more health conscious, rules about food labels have
become more complex and stringent. This is an example of government acting as
a. regulator.
b. redistributor.
c. taxer.
d. defender.
e. referee.
On January 1, 2010, a homeowner borrowed $5,000 for a term of six months to
complete some home improvements, paying an annual interest rate of 8 percent. How
much principal and interest will the homeowner pay back on July 1, 2010?
a. $2,500
b. $2,900
c. $5,200
d. $5,400
If the price of gasoline rises by 20 percent and consumption of gasoline falls 5 percent,
a. demand is elastic.
b. demand is unit-elastic.
c. demand is inelastic.
d. elasticity of demand cannot be calculated.
The largest single portion of the federal budget is devoted to
a. National defense.
b. Medicare and Medicaid.
c. Social Security and unemployment compensation.
d. Education.
e. Interest payments on the national debt.
A mixed economy is one that combines public and private ownership of property.
a. True
b. False
Under monopolistic competition, profits cannot persist because new firms will be
attracted to the market.
a. True
b. False
Michigan recently did away with property taxes. Alternative funding for schools could
come from
a. a lottery system.
b. an increase in sales tax and income tax.
c. an increase in corporate taxes.
d. All of the above are correct.
The interest rate is the
a. rate of investment.
b. price of credit.
c. rate of return on investment in capital goods.
d. expected rate of inflation.
The real cost of a decision is the opportunity cost measured in the commodities forgone.
a. True
b. False
Which of the following is an example of an investment?
a. A company placing cash reserves in a bank.
b. A company buying Yahoo shares.
c. A company augmenting its production capacity.
d. A company issuing bonus shares.
Which of the following will tend to occur if price floors are imposed on a product?
a. persistent surpluses
b. problems of disposal of goods
c. disguised discounts developing to eliminate excess production
d. overinvestment in the industry
e. All of the above are correct.
The difficulty in analyzing oligopolistic behavior arises from the
a. degree of government regulation of the market structure.
b. interdependent nature of oligopolistic decisions.
c. large number of firms in the industry.
d. market power of consumers.
Owning a patent can provide a firm with monopolistic power.
a. True
b. False
A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.
No corresponding factory produces only right shoes. This outcome is an example of
inefficiency in
a. output selection.
b. production planning.
c. product distribution.
d. market segmentation.
The U.S. remains the world's economic leader in all respects.
a. True
b. False
The marginal productivity theory is irrelevant to organizing production in a socialist
society.
a. True
b. False
What is the meaning of "a defective telescopic faculty," as described by A.C. Pigou?
a. Persons are unable to plan rationally for consumption.
b. Persons zero in on something and cannot consider alternatives.
c. Persons seek long-term goals and ignore present problems.
d. Persons are unable to give adequate weight to the future.
Describe the profit-maximizing firm's decision about how much to spend on innovation.
A market system works very well in solving some basic problems of the economy but it
fails in some cases. Provide examples.
What has happened to resource prices in the twentieth century and what do they reveal
about resource scarcity?
Explain why bond prices and interest rates are inversely related.
Baumol and Blinder offer some reasons why countries trade with each other. List three
of the reasons, and give an example of each to illustrate the reason.
Economists tend to be concerned about entry barriers. Why are entry barriers so
important?
What is the marginal rate of substitution, and what role does it play in determining the
consumer's optimum choice?
Explain the circumstances under which some component of labor income is economic
rent.
Sun City's public bus line has been operating at a deficit. The city decides to raise the
fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the
deficit. What assumption is the city making about price elasticity?
If marginal net utility is positive, the consumer must be buying too small a quantity to
maximize total net utility. Why?
