Which of the following observations concerning the absolute definition of poverty is
true?
a. It is based on average income.
b. It is an optimistic definition.
c. It is not arbitrary in nature.
d. It is a cultural definition.
Figure 4-4
Assume that Figure 4-4 shows demand for MP3 players. An increase in the price of
music downloads changes demand from
a. D1 to D2.
b. D2 to D1.
c. D2 to D3.
d. D1 to D3.
All business firms should consider their fixed costs in determining the prices they set.
a. True
b. False
The major difference between stocks and bonds is
a. a stock is ownership in the corporation and a bond is a debt instrument of the
corporation.
b. a stock is a debt instrument of the corporation and a bond is ownership in the
corporation.
c. a stock has value in the marketplace and a bond does not.
d. a bond has value in the marketplace and a stock does not.
The prices that are in the public’s best interest will
a. always allow the regulated firm to break even.
b. always allow the regulated firm to make positive economic profits.
c. sometimes leave the regulated firm with economic losses.
d. leave the regulated firm with profits that are about 10 percent higher than those of
other firms.
If a nation can produce greater quantities of a good than another nation, it has a(n)
a. comparative advantage.
b. absolute advantage.
c. declarative advantage.
d. entire advantage.
Suppose demand can be described with the equation Q = 900 − 5P and supply with the
equation Q = 100 + 5P.
a. Determine the equilibrium price and quantity.
b. Determine the surplus or shortage if the price were $100.
Figure 22-5
From the graph in Figure 22-5 (curves show output per unit of labor input), one can
infer that
a. in terms of TVs, computers are more expensive in China than Japan.
b. in terms of computers, TVs are more expensive in China than Japan.
c. China should produce more TVs and fewer computers.
d. All of the above are correct.
Briefly and concisely define the following terms and explain their importance in the
study of economics.
a. excess capacity theorem
b. price leadership
c. kinked demand curve
d. perfectly contestable market
Economists study perfect competition
a. because many markets are perfectly competitive.
b. for its descriptive realism.
c. to establish a benchmark by which to measure the performance of the economy.
d. All of the above are correct.
In 2013, interest payments were about ____ percent of national income.
a. 0,51/2
b. 1,29
c. 3,2
d. 4,0
Figure 7-2
In Figure 7-2 at an output of 500, marginal cost equals
a. 10.
b. 20.
c. 30.
d. 40.
In the short run, if price is below AC, maximizing profits really means minimizing total
losses.
a. True
b. False
A firm will tend to follow competitors when they increase spending on R&D, but will
not follow them when they decrease such spending.
a. True
b. False
When a teacher in a private school points out to her high school principal that since
there are empty seats in all classrooms, the cost of additional students is really zero, she
is using the
a. law of comparative advantage.
b. principle of marginal analysis.
c. theory of externalities.
d. notion of the cost decreases of the service sector.
e. concept of opportunity cost.
Which of the following taxes is most likely to be shifted?
a. a property tax on an owner-occupied residence
b. a progressive income tax
c. a flat-rate state income tax
d. a general sales tax
A decrease in supply will have what effect on equilibrium price and quantity?
a. Price will increase; quantity will decrease.
b. Price will decrease; quantity will increase.
c. Both price and quantity will increase.
d. Both price and quantity will decrease.
Figure 6-3
In Figure 6-3(a), demand is
a. perfectly elastic.
b. perfectly inelastic.
c. unit elastic.
d. fixed at one particular quantity.
A firm sells in a competitive market in which price is $10. Its marginal cost is 2 + .5Q.
Determine the profit-maximizing level of output.
What is an export subsidy? Discuss some of the recent examples where such subsidies
were controversial.
What is the value of marginal profit at the profit-maximizing output?
Draw a long-run average cost curve that first exhibits increasing returns to scale
(economies of scale), then constant returns to scale, and finally decreasing returns to
scale (diseconomies of scale). Label each region.
Harry Truman is credited with the statement, “Give me a one-armed economist,”
because economists are likely to say, “On the one hand, . . . on the other hand.” Why do
economists “waffle” more than physicists or chemists?
“If it were not for the law of diminishing marginal returns, the world’s wheat could be
grown in a flower pot.” Explain.
Electric utilities have trumpeted nuclear power for years, advocating it as lower in
production costs than other alternatives. Yet, society has resisted heavy reliance on
nuclear power. Explain the source of the disagreement and suggest which side (utilities
or society) is correct.
The sales manager of a retail outlet suggests that the best way to increase customers is
to have a sale. If a 10 percent price cut doesn’t bring in enough customers, then he’ll cut
prices 20 percent. Increased cash flow should take care of profits. Do you agree?
Explain.
How would you interpret [1] an upward sloping curve and [2] a zero slope curve in a
two variable diagram?
What makes production-planning a daunting task for central planners?