If the United States has an absolute advantage in producing computer components, it
should export them worldwide.
a. True
b. False
According to the law of diminishing marginal rate of substitution,
a. as consumption of good A increases, other things constant, its marginal utility
declines
b. as consumption of good A increases, other things constant, one is willing to give up
increasing amounts of good B to get another unit of good A
c. as consumption of good A increases, other things constant, the amount of good B one
is willing to give up to get another unit of good A falls
d. the indifference curve’s slope increases as more of the good on the horizontal axis is
consumed
e. indifference curves intersect when marginal utilities fall
Moderate exercise is better than none, but excessive exercise is harmful. What is the
shape of the graph of health benefits versus hours of exercise per week if health benefits
are measured on the vertical axis and exercise is measured on the horizontal axis?
a. a positively sloped straight line
b. a negatively sloped straight line
c. a vertical straight line
d. a U-shaped curve
e. a hill-shaped curve
For each size of plant a manufacturer could build, there is a different
a. long-run average fixed cost curve
b. long-run average variable cost curve
c. short-run average total cost curve
d. long-run average total cost curve
e. long-run marginal cost curve
Step one in the scientific method is
a. formulate a hypothesis
b. reflect an opinion
c. specify assumptions
d. identify the question and define relevant variables
e. test the hypothesis
If the marginal cost curve shifts upward, a profit-maximizing, nondiscriminating
monopolist is likely to respond in the short run by
a. raising price and increasing output
b. raising price and decreasing output
c. keeping price constant and increasing output
d. reducing price and increasing output
e. shutting down
A normal good is defined as a product for which quantity demanded increases as price
decreases.
a. True
b. False
When the social cost of production is greater than the private cost, we have a
a. positive externality
b. negative externality
c. public good
d. private good
e. positive spillover
Exhibit 7-20
In Exhibit 7-20, the movement from AB to CD might reflect a(n)
a. increase in the prices of both labor and land
b. decrease in the prices of both labor and land
c. increase in the price of labor and a decrease in the price of land
d. decrease in the price of labor and an increase in the price of land
e. increase in the amount the producer can spend
If General Motors is earning only a normal profit,
a. it is making economic profit
b. it is breaking even
c. it is suffering an economic loss
d. it is covering only explicit costs
e. it is covering only implicit costs
The demand curve faced by a firm with a patent on a marketable product
a. is horizontal
b. is vertical
c. slopes upward
d. slopes downward
e. is nonexistent
A monopolist is
a. one of a large number of small firms that produce a homogeneous good
b. one of a small number of large firms that produce a differentiated good
c. a single seller of a product with many close substitutes
d. one of a small number of large firms that produce a homogeneous good
e. a single seller of a product with no close substitutes
Exhibit 7-4
In Exhibit 7-4, marginal returns increase with the hiring of up to __________
worker(s).
a. one
b. two
c. three
d. four
e. five
When a firm has the option of using two different inputs and it elects to use only one
(e.g., labor), it will be at the vertical or horizontal intercept of its isocost line.
In 2011, in the world’s poorest countries income per capita was less that one dollar per
day.
a. True
b. False
Quotas and tariffs discourage foreign governments from retaliating with quotas and
tariffs of their own.
a. True
b. False
The term “utility” means
a. satisfaction
b. a low-valued good
c. productivity
d. adaptability
e. efficiency
If the price of apples falls, the substitution effect will cause a consumer to reduce her
consumption of apples.
The significance of the minimum point on the average variable cost curve is that
a. it is the profit-maximizing level
b. it is the selling price
c. it is the point of indifference between producing at a loss or shutting down
d. if the firm produces one more unit, its AVC will be less than MC
e. it shows the amount of total cost
The Sherman Act
a. created the Federal Trade Commission
b. established the Department of Justice Guidelines
c. regulated railroad and trucking industries
d. outlawed restraints of trade
e. forbade price discrimination
Exhibit 9-12
The total revenue for the nondiscriminating monopolist in Exhibit 9-12 is
a. $0e x 0f
b. $0c x 0g
c. $0d x 0f
d. $0b x 0f
e. $0d
In the real world, demand is not likely to be perfectly inelastic at every price because
a. no substitutes exist for some goods
b. some consumers will be unable to afford very high prices with given incomes
c. at low prices, consumers always want a lot
d. consumers are willing to pay any price for certain goods
e. the prices of certain goods don’t change
A monopolist
a. can charge whatever price it wants
b. charges more than almost any consumer is willing to pay
c. is constrained by marginal cost in setting price
d. is constrained by demand in setting price
e. always earns an economic profit
Rent seekers are those who seek to
a. use the government to protect their existing property interests
b. use the government to change the rules of the market game in their favor
c. convert public land into private land
d. convert public resources into private resources
e. maximize their own private gains from trade
Which of the following is true at the profit-maximizing quantity for both a perfectly
competitive firm and a monopoly?
a. Price equals marginal cost.
b. Price is greater than marginal cost.
c. Marginal revenue equals marginal cost.
d. Marginal revenue is less than marginal cost.
e. Marginal revenue is greater than average revenue.
When the exchange rate is allowed to adjust to market forces, all of the following are
true except one. Which is the exception?
a. The foreign exchange market clears continually.
b. The quantities of foreign exchange demanded and supplied are equal.
c. The exchange rate will only change if the central bank alters the exchange rate.
d. The exchange rate will remain constant until a change occurs in one of the factors
that affect supply or demand.
e. The forces of demand and supply determine the exchange rate.
Government bureaus, unlike private firms,
a. derive their revenue by selling output to the government
b. have incentives to respond to consumers’ desires
c. price their output by equating marginal cost and marginal revenue
d. attempt to achieve zero profit
e. receive little consumer feedback
Exhibit 9-6
What is the profit-maximizing price for the monopolist in Exhibit 9-6?
a. $14
b. $11
c. $10
d. $9
e. $8
A firm hires labor in a perfectly competitive labor market. If the wage rate is $44, the
firm should hire
a. 44 workers
b. all units of labor whose marginal product is 44
c. all units of labor whose marginal revenue product is $44
d. all units of labor whose marginal revenue product is greater than or equal to $44
e. all units of labor whose marginal revenue product is less than or equal to $44
On a production possibilities frontier showing possible output levels of good A and
good B, the opportunity cost of producing the first 10 units of A will usually be
a. the same as the opportunity cost of producing the second 10 units of A
b. less than the opportunity cost of producing the second 10 units of A
c. greater than the opportunity cost of making the second 10 units of A
d. 10 units of A
e. 10 units of B