Two stores€Lazy Guy’s and Ralph’s Recliners€are located in the same city. Both stores
buy recliner chairs from the same manufacturer at the same price and both stores are
about the same size, so that the fixed costs of production for both stores are the same.
Ralph’s Recliners sells more recliners per month and Ralph’s has a lower average total
cost of production. Which of the following can explain why the average total cost of
production is lower for Ralph’s Recliners?
A) Because Ralph’s Recliners sells more output, its average fixed costs are lower than
Lazy Guy’s average fixed cost.
B) The rent Lazy Guy’s pays for its building is greater than the rent paid by Ralph’s
Recliners.
C) Ralph’s explicit costs are less because Ralph owns the land on which his building is
located. Lazy Guy must make lease payments for the land on which its store is located.
D) The price of recliners charged by Ralph’s is greater than the price charged by Lazy
Guy’s.
A critical function of the government in facilitating the operation of a market economy
is
A) producing goods and services for low income households.
B) setting up and enforcing private property rights.
C) ensuring an equal distribution of income to all citizens.
D) controlling the market prices of food items.
Figure 18-5 Figure 18-5 shows the
Lorenz curve for a hypothetical country. The highest 20 percent of households
A) earn 24 percent of the society’s total income.
B) earn 28 percent of the society’s total income.
C) earn 42 percent of the society’s total income.
D) earn 72 percent of the society’s total income.
In cities with rent controls, the actual rents paid can be ________ than the legal
maximum. One explanation for this is because there is a ________ of apartments,
tenants are ________.
A) higher; shortage; often willing to pay rents higher than the law allows
B) higher; surplus; often forced to pay rents higher than the law allows
C) lower; surplus; never willing to pay rents below the legal maximum
D) lower; shortage; rarely willing to pay rents lower than the law allows
The difference between the lowest price a firm would have been willing to accept and
the price it actually receives from the sale of a product is called
A) producer surplus.
B) profit.
C) marginal revenue.
D) price differential.
The price elasticity of demand for Stork ice cream is -4. Suppose you’re told that
following a price increase, quantity demanded fell by 10 percent. What was the
percentage change in price that brought about this change in quantity demanded?
A) 40 percent
B) 25 percent
C) 2.5 percent
D) 0.4 percent
Suppose the demand curve for hybrid cars shifts to the right. This will cause a relatively
small increase in the price of hybrid cars if
A) demand is elastic and supply is inelastic.
B) demand is inelastic and supply is elastic.
C) both demand and supply are inelastic.
D) both demand and supply are elastic.
Table 26-5
Seth is a competitive body builder. He says he has to have his 12-oz package of protein
powder to “feed his muscles” every day. On the basis of this information, what can you
conclude about his price elasticity of demand for protein powder?
A) It is elastic.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) The price elasticity coefficient is 0.
Knowledge capital is
A) rival.
B) nonrival.
C) nonexcludable.
D) both B and C
The largest source of federal government revenue in 2012 was
A) sales taxes.
B) corporate income taxes.
C) individual income taxes.
D) payroll taxes to fund Social Security and Medicare programs.
A firm can fund an expansion of its operations by
A) issuing bonds.
B) buying stock.
C) paying dividends.
D) loaning money.
Under the Patient Protection and Affordable Care Act (ACA), residents who do not
have health insurance will not be allowed to seek employment.
Tanesha sells homemade candles over the Internet. Her annual revenue is $64,000 per
year, the explicit costs of her business are $17,000, and the opportunity costs of her
business are $22,000. What is her accounting profit?
A) $17,000
B) $22,000
C) $47,000
D) $64,000
Figure 9-1
Based on the graph of the labor market above, if a minimum wage of $8 per hour is
imposed, which of the following will result?
A) The quantity of labor demanded by firms will rise.
B) The quantity of labor demanded by firms will fall.
C) The unemployment rate will fall.
D) Both A and C will occur.
Assuming the United States is the “domestic” country, if the real exchange rate between
the United States and Russia decreases from 28 to 23,
A) the prices of U.S. goods and services have decreased by 5% relative to Russia.
B) the prices of U.S. goods and services have increased by 25.5% relative to Russia.
C) the prices of U.S. goods and services have decreased by 18% relative to Russia.
D) the prices of U.S. goods and services have increased by 22% relative to Russia.
Because producers do not bear the external cost of pollution,
A) the economically efficient level of production is achieved.
B) private production is below the economically efficient level.
C) private production exceeds the economically efficient level.
D) the market price is too high.
The quantity theory of money seeks to explain the connection between money and
A) interest rates.
B) unemployment.
C) output.
D) prices.
Some economists have argued that certain characteristics of the delivery of health care
justify government intervention. One of these characteristics is
A) health care is a public good.
B) health care is nonrival and nonexcludable.
C) health care generates negative externalities.
D) health care generates positive externalities.
Table 2-6
Table 2-6 shows the output per week of two people, James and Lucy. They can either
devote their time to making bracelets or making necklaces. Which of the following
statements istrue?
A) Lucy has a comparative advantage in making both products.
B) James has a comparative advantage in making both products.
C) Lucy has a comparative advantage in making wagons and James in making tricycles.
D) Lucy has a comparative advantage in making tricycles and James in making wagons.