An efficient allocation of resources exists if
a. one group of people can get more of the things they want without someone else
having to give up anything.
b. no one can get more of the things he wants without someone else having to give up
something.
c. the economy operates at any point under the production possibilities frontier.
d. the economy is operating at any point above the production possibilities frontier.
In general, the quantity of savings supplied to be used for lending increases with the
rate of interest.
a. True
b. False
An advertising race among oligopolists may be rational if it
a. is defense advertising.
b. raises entry barriers.
c. increases cost per unit of sales.
d. encourages new entrants.
The factor accounting for most of the earnings difference between equally educated and
experienced men and women is that women
a. receive less pay for equal work.
b. are segregated into low-paying occupations.
c. receive comparable pay only when they do work of comparable value to the
employer.
d. are prohibited by law from doing certain kinds of work.
The construct used to demonstrate efficient use of society’s resources is the
a. production possibilities frontier.
b. payoff matrix.
c. input-output table.
d. cost-benefit table.
At optimal output, the firm described in Table 8-1 earns a profit of
a. $1 per unit of output.
b. $2 per unit of output.
c. $1 total.
d. $2 total.
Production indifference curves show the combination of inputs that produce a given
output.
a. True
b. False
Individuals cannot buy unemployment insurance for themselves. The most likely reason
for this is
a. moral hazard.
b. imperfect information.
c. a culture of poverty.
d. the free-rider problem.
Table 8-2
In Table 8-2, the profit-maximizing level of output is
a. 6
b. 10
c. 16
d. 21
A ‘single tax” on land was proposed in the nineteenth century by
a. Lloyd George.
b. Henry George.
c. George Washington.
d. George Sands.
According to conventional human capital theory, college graduates earn more than high
school graduates because
a. college graduates insist on a financial return on their human investments.
b. college graduates are made more productive by their greater training.
c. jobs that require more education must pay higher wages to attract enough workers.
d. All of the above are correct.
Excise taxes are a form of sales tax.
a. True
b. False
Which of the following acts required that financial derivatives be traded in established,
regulated markets?
a. Glass-Steagall Banking Act
b. Gramm-Leach-Bliley Financial Services Modernization Act
c. Dodd-Frank Wall Street Reform and Consumer Protection Act
d. Celler-Kefauver Financial Reform Act
The economic justification for public subsidies to university research is based on
a. the value of this research to the university.
b. the higher salaries graduate students earn as a result of working with professors
involved in research.
c. the external benefits of research and development to, in particular, high rates of
economic growth.
d. higher incomes earned by those who provide services to university researchers
(equipment, supplies, etc.).
A graph’s origin is the point of intersection of all lines or curves in the graph.
a. True
b. False
The basic concept behind strategic trade policy is that free trade is the best policy to
pursue, but some countries don’t play by those rules. Therefore,
a. it makes no sense to engage in trade at all, and it makes sense to be self-sufficient.
b. it makes sense to restrict imports of items that are of military significance in order to
maintain a strong defense posture.
c. it makes sense to threaten to protect markets unless other nations agree to open theirs.
d. it makes no sense to export items of strategic importance to other nations, because
they should make them on their own.
A production possibilities curve always slopes downward to the right because resources
a. are not scarce.
b. have no opportunity cost.
c. are freely available.
d. are limited.
e. are not related to outputs.
Moral hazard is best described as
a. an action by an individual that endangers others.
b. an action that puts one’s salvation at risk.
c. the presence of insurance increasing risk taking behavior.
d. vigilance by individuals to keep total insurance claims at a minimum to keep rates
low.
Retained earnings may be a better source of funds than issuing stocks or bonds because
management does not have to account for their effectiveness this way.
a. True
b. False
Government-imposed limits on price movements are likely to
a. increase economic efficiency.
b. decrease economic efficiency.
c. leave economic efficiency unchanged.
d. promote economic growth in the economy.
Perfectly competitive firms ____ earn zero economic profit in long-run equilibrium
because ____.
a. always; firms in perfectly competitive industries always maximize output and so
flood the market until the equilibrium price of output is driven to zero
b. sometimes; the demand curve for an individual perfectly competitive firm may or
may not cross the company’s long-run average total cost curve at its lowest point
c. always; firms enter whenever their economic profit is positive and exit whenever it’s
negative, so in long-run equilibrium economic profit must always be zero
d. never; no firm would be willing to produce if it received zero economic profit