If the production possibilities curves of two countries have the same slope,
a. neither has a comparative advantage, and there are no gains from trade.
b. although there is no comparative advantage, there are potential gains if there are
differences in absolute advantage.
c. neither has an absolute advantage, and there cannot be gains from trade.
d. both have an absolute advantage, and can gain from trade.
If there are strong economies of scale and scope, then society
a. will not be able to prevent overt collusion.
b. will benefit from establishing a cartel.
c. cannot benefit from regulation of a natural monopoly.
d. will not be able to preserve free competition.
Which of the following will lead to a movement along the same demand curve?
a. Changes in income.
b. Changes in the price of substitute goods.
c. Changes in the price of the product.
d. Changes in the preference of the consumer.
Anything that influences a good’s price or the marginal physical product of labor will
influence wages.
a. True
b. False
Prices set too low can actually be against the public interest.
a. True
b. False
Total profit
a. is the difference between sales revenue and costs.
b. maximization is always the goal of every firm.
c. is always defined the same by both economists and accountants.
d. is maximized when sales are maximized.
Over 50 percent of all U.S. workers now belong to unions.
a. True
b. False
Increasing concentration always means an industry has become effectively
monopolized.
a. True
b. False
Which of the following government entities relies most heavily on sales taxes?
a. local government
b. state government
c. federal government
d. the Social Security Administration
The first economist to point out the importance of specialization of labor was
a. Leonardo da Vinci.
b. Adam Smith.
c. David Ricardo.
d. John Maynard Keynes.
e. Enrico Caruso.
In early 1996, the upper Midwest suffered record cold, with wind chills of fifty degrees
below zero or worse. Yet, grocery stores stocked fresh citrus fruit (obviously not grown
locally). Why did grocers stock the fruit?
a. the desire for profit
b. concern for their neighbors
c. the need to dispose of excess production
d. government orders to distribute fruit
e. All of the above are correct.
On June 2, 2010, Dow Chemical’s 4.1 percent coupon bonds, with face values of $100,
sold for $95 This means that the yield on these bonds was
a. less than 4,1 percent.
b. equal to 4,1 percent.
c. equal to 95 percent of 4,1 percent.
d. greater than 4,1 percent.
If marginal revenue product is less than price of the input, the firm should use more of
the input.
a. True
b. False
A usury ceiling will be effective depending on
a. whether the usury rate is above 10 percent.
b. whether the usury rate is above 8 percent.
c. whether that rate is below what the equilibrium rate of interest would have been in a
free market.
d. how well organized the lending institutions are.
An example of an in-kind benefit is
a. a welfare payment.
b. capital gains.
c. a charitable contribution of money.
d. public housing.
Opportunity cost can always be measured in money terms.
a. True
b. False
Price leadership may sometimes be an example of covert collusive behavior by
oligopolies.
a. True
b. False
Why is the demand curve for a monopolist downward sloping? How does this affect the
monopolist’s behavior?
“Free trade benefits one country at another country’s expense.” Evaluate this statement
using economic analysis.
Compare the U.S. health care system to that of other countries. Are we getting superior
health care for the money we spend?
How is state and local government funded and how does such funding differ from
federal government funding?
Explain how short-run and long-run equilibrium in monopolistic competition differ. Use
graphs to illustrate your answer. Be sure that your graphs are completely and correctly
labeled.
President Barack Obama pushed forward a national health care plan to increase the
availability of medical care for all Americans. How would one determine the
opportunity cost of the proposal?
Why is the supply of loanable funds often interest inelastic?
Use consumer indifference curves and budget lines to show the optimal consumption
curves for a normal good and for an inferior good. (Use two graphs.) Be sure your
graphs are completely and correctly labeled.
Why does perfect competition shun advertising? Does advertising benefit a monopoly?