Exhibit 5-8
Which of the following statements is true in the range of the total revenue curve labeled
A in Exhibit 5-8?
a. Demand is elastic.
b. Demand is inelastic.
c. Demand is unit elastic.
d. We cannot tell anything about elasticity of demand because this is a total revenue
curve.
e. Demand is perfectly elastic.
An extra hour of market work is an attractive use of your time
a. because of the utility generated by goods made possible through the extra work
b. solely because of the personal satisfaction it generates
c. when the disutility of income generated by the extra work exceeds the utility
d. when the net utility of the extra goods made possible and the extra work is greater
than zero
e. only when you do not enjoy leisure time
Which of the following is true?
a. International trade makes it possible for a country’s consumption possibilities to
exceed its production possibilities.
b. International trade requires that a country’s production possibilities exceed its
consumption possibilities.
c. A country’s production possibilities always equal its consumption possibilities.
d. A country’s consumption possibilities can never equal its production possibilities
because of leakages in the system.
e. As long as there is full employment of resources, a country’s production possibilities
will exceed its consumption possibilities even with trade.
All of the following are examples of product differentiation except one. Which is the
exception?
a. developing a new video game or a computer program called “How to Teach Your
New Dog Old Tricks”
b. manufacturing a car that minimizes outside noise relative to other cars
c. lowering the price of a good in a special sale
d. providing movies and special meals on airline flights
e. making sodium-free, caffeine-free colas
In a perfectly competitive resource market, the marginal resource cost of a resource
equals the price of the resource.
a. True
b. False
The relationship between income and education is clear. At every age, those with more
education earn more.
a. True
b. False
Exhibit 17-6
In Exhibit 17-6, a per-unit subsidy of __________ would result in production of the
socially optimal quantity.
a. $4
b. $6
c. $2
d. $1.50
e. $3.00
Exhibit 7-17
Which of the following points in Exhibit 7-17 represent capital-labor combinations that
cost the firm the same amount?
a. a, b, and c
b. d, e, and f
c. a, e, and c
d. d, b, and f
e. b and e
Exhibit 10-6
In Exhibit 10-6, what is the maximum profit this monopolistic competitor can earn in
the short run?
a. $40
b. $4
c. $48
d. $8
e. $0
What is the rationale for government provision of education?
a. Not all incomes are equal, but everyone has the right to education regardless of
wealth.
b. Potential students consider only their personal benefits gained from education, but
the rest of society benefits, too.
c. No education would be provided in the absence of government provision because
everyone would consume it without paying.
d. The cost of providing education for the entire public is too large.
e. The government can provide education at a much lower cost than the private sector.
If good B is a complement to good A, then a decrease in the price of B
a. increases the quantity demanded of A
b. decreases the demand for A
c. increases the demand for A
d. decreases the quantity demanded of A
e. will cause the demand for B to increase
The division of a resource’s earnings between economic rent and opportunity cost
depends on the resource owner’s
a. elasticity of labor supply
b. price elasticity of labor demand
c. income elasticity of labor demand
d. cross-price elasticity of demand
e. marginal revenue product
Exhibit 10-16
In Exhibit 10-16, the monopolistic competitor’s profit-maximizing level of output is
a. 1 unit
b. 2 units
c. 3 units
d. 4 units
e. 5 units
At the point where diminishing marginal returns set in, the slope of the total product
curve is
a. positive and increasing
b. positive and decreasing
c. negative and increasing
d. negative and decreasing
e. constant
The current system of international finance is a
a. gold standard
b. fixed exchange rate system
c. floating exchange rate system
d. managed float exchange rate system
e. pooled currency exchange system
Specialization often leads to gains in productivity for society as a whole.
a. True
b. False
If demand is inelastic, the percentage change in price is greater than the resulting
percentage change in quantity demanded.
a. True
b. False
If the value of a cable TV franchise is uncertain, too much may be bid for the franchise.
This is an example of
a. moral hazard
b. an authority relation
c. the winner’s curse
d. the principal-agent problem
e. adverse selection
Exhibit 11-10
In Exhibit 11-10, if the wage were $84, how many workers would the firm hire?
a. 0
b. 1
c. 2
d. 3
e. 4
Exhibit 2-2
According to Exhibit 2-2, Maria’s opportunity cost of typing a page is
a. 4 loads of laundry
b. 6 loads of laundry
c. 2/3 of a load of laundry
d. 3/2 of a load of laundry
e. impossible to compute
Exhibit 11-12
Exhibit 11-12 depicts a single firm hiring labor in a perfectly competitive labor market.
Initially, the marginal revenue product of labor is represented by MRP1 and the firm
operates at point D. Suppose there is an decrease in the market price of the product
produced by labor, which point depicts the likely impact on this firm in their hiring
decision?
a. point C
b. point E
c. point A
d. point D
e. cannot tell from the information provided
One of the reasons that import substitution is popular is that
a. there was never any demand for the products in question
b. infant industries would have to compete against global rivals
c. it benefits suppliers to the favored domestic industries
d. it slows down the progression through the production chain
e. the emphasis is on comparative advantage and trade expansion
A large inheritance from a relative will tend to
a. cause movement up and to the right along your labor supply curve
b. cause movement down and to the left along your labor supply curve
c. shift your labor supply curve outward
d. shift your labor supply curve inward
e. make the income effect of a wage increase positive
Which of the following would not be considered a fixed cost for a law firm?
a. paper for the photocopy machine
b. property taxes
c. insurance premiums
d. license fees
e. interest on loans
A firm will only earn normal profit in the long run
a. if firms can freely enter or leave the market
b. if firms do not try to maximize profit
c. only if the industry is perfectly competitive
d. whenever products are not differentiated
e. if barriers to entry exist
A cartel is
a. a group of oligopolistic firms that engage in formal collusion
b. a group of monopolistically competitive firms which charge the same price
c. usually legal in the United States
d. an agreement among rival firms to set prices independently
e. illegal throughout the world
Why has there been a big jump in pay to U.S. CEOs?
a. The U.S. economy has grown sharply in recent decades, so U.S. businesses serve a
wider market
b. U.S. companies can usually sell a valued product around the world
c. There is wider competition for the top people
d. High salaries are more socially acceptable
e. All of the answers are correct
Which of the following is true?
a. If the Australian dollar depreciates, the Australian trade deficit decreases, since
Australian products become cheaper to foreigners.
b. If the Australian dollar depreciates, the Australian trade deficit decreases, since
Australian products become more expensive to foreigners.
c. If the Australian dollar depreciates, the Australian trade deficit increases, since
Australian products become more expensive to foreigners.
d. If the Australian dollar appreciates, the Australian trade deficit decreases, since
Australian products become cheaper to foreigners.
e. If the Australian dollar appreciates, the Australian trade deficit decreases, since
Australian products become more expensive to foreigners.
In the balance of payments accounts, a net importer of capital is a nation that
a. sells more goods in foreign countries than it imports
b. buys more goods from foreign countries than it exports
c. sells more assets to individuals in other countries than the assets it buys from them
d. buys more assets from individuals in other countries than the assets it sells to them
e. imports less machinery than it exports
Exhibit 17-4
Which of the following could not have caused the increase in demand indicated in
Exhibit 17-4?
a. new firms located on the river
b. the pollution was discovered to be more hazardous than had previously been
supposed
c. the cost of pollution abatement equipment rose
d. consumers wanted to buy more of the good produced by the polluters
e. the government subsidized firms so they could better afford to buy pollution rights
An improvement in technology
a. will always result in a parallel shift of the production possibilities frontier
b. will never result in a parallel shift of the production possibilities frontier
c. will be indicated as a movement along the production possibilities frontier
d. will shift the production possibilities frontier outward but not necessarily to a parallel
position
e. may not shift the production possibilities frontier