Both parties gain in a voluntary exchange.
a. True
b. False
TANF compels welfare recipients to go to work after a period of two years.
a. True
b. False
For any combination or outputs, there is an efficient allocation of income.
a. True
b. False
Figure 7-13
Figure 7-13 shows the average total cost curves of four firms that produce milk. Some
of the dairies are more productive. AR = P is the long-run price of milk. How many of
these dairies will remain in the industry in the long run?
a. all of them
b. only 2
c. only 3
d. cannot determine with information given
The demand curve for any input is the downward-sloping portion of its marginal
revenue product curve.
a. True
b. False
Any change that shifts the supply curve outward to the right, and does not affect the
demand durve will lower the equilibrium price and raise the equilibrium.
a. True
b. False
In the short-run, the lowest price that a perfectly competitive firm will accept without
closing its doors is found by examining the average variable cost curve.
a. True
b. False
In reality, decisions made by firms may not always produce maximum total profit
because some executives
a. are more motivated by altruism.
b. are more interested in market share than profits.
c. may push research and development to the point that profits decline.
d. All of the above are correct.
A society’s decision to produce more tanks may require it to forgo production of some
cars.
a. True
b. False
The human capital model assumes that
a. education is a productive investment that raises total output.
b. education does not change potential productivity, but it does save resources by
reducing sorting costs for employers.
c. the educational system is a very expensive process to legitimize the intergenerational
transmission of privileged status.
d. such factors as the love of learning should be included in the analysis.
A well-functioning market will have high monetary costs applied to high opportunity
costs.
a. True
b. False
Economists believe having higher prices for scarcer resources promotes efficiency.
a. True
b. False
Between 1988 and 1989, the price of retail space in Ginza, Tokyo’s premier commercial
and entertainment center, rose from $400 to $625 per square foot. This was the result of
an increase in demand in the face of a perfectly inelastic supply curve for retail space.
Economists call this
a. monopoly profit.
b. economic rent.
c. usury.
d. marginal revenue product.
Under EPA regulations, a factory
a. must pay for the right to pollute.
b. can increase air pollution from its grinding process if it decreases air pollution from
its smelting process.
c. cannot under any circumstances build a polluting factory in an area where pollution
standards are not being met by existing firms.
d. None of the above is correct.
The distribution process performed by the price system is not as efficient as the
distribution process of central planners.
a. True
b. False
Total profit equals
a. TR − TC.
b. average profit times total output.
c. total sales revenue minus total cost.
d. All of the above are correct.
An increase in a family’s income will cause its budget line to
a. become steeper.
b. become flatter (less steep).
c. move closer to the origin.
d. move away from the origin.
e. become more convex toward the origin.
Profit maximization is
a. the only motive of any firm’s management.
b. a behavioral assumption to simplify analysis.
c. the same as satisficing.
d. a literal description of a firm’s behavior.
The rule of MC = MR does not apply to a monopolist.
a. True
b. False
The gains made against poverty by President Lyndon Johnson’s “War on Poverty” were
largely reversed by:
a. welfare cuts
b. an elimination of many jobs to overseas manufacturing facilities
c. slower economic growth
d. all of the above.
e. a and c only
Direct controls work if
a. there is vigilance and enthusiasm in enforcement by the regulatory agency.
b. speed and rigor are used in the court system in prosecuting cases.
c. there are significant penalties imposed by the legal system.
d. All of the above occur.
If I use 1,000 gallons of water a month at a price of $.01 a gallon, is my consumer
surplus likely to be large or small? Explain.
What you mean by business cycles? What are their consequences?
What are the three coordination tasks which markets resolve?
Compare market price and quantity of steel to socially optimal price and quantity if
steel producers ignore soot emitted from their smokestacks. Use a graph to assist your
explanation.
Compare the advantages and disadvantages of marginal and average cost pricing for
natural monopolies.
The authors of the text suggest that a comprehensive personal income tax with few
loopholes would be efficient and equitable. What is their reasoning for this statement?
List and discuss the importance of the major effects of the deregulation that occurred in
the 1980s.
At various times, the United States has undergone the painful process of reducing
military spending. Military bases from the Carolinas to California pleaded to be spared,
citing huge job losses if they close. How can one rationally decide which bases to shut
down, given the necessity of jobs?
Distinguish the terms price ceiling and price floor.