A theory is an abstraction used often by economists to
a. describe a problem.
b. keep all assumptions in their proper places.
c. explain why things work the way they do.
d. describe a hierarchical ordering of facts.
e. arrange variables into a graphical format.
The demand curve depicts quantities demanded that have been gathered as prices have
changed over time.
a. True
b. False
Economic rent is the amount of money above and beyond that necessary to keep the
factor of production employed where it is.
a. True
b. False
The principle of comparative advantage explains specialization and trade among
countries but not among individuals.
a. True
b. False
Graphs are valuable because they facilitate interpretation of data.
a. True
b. False
One implication of human capital theory is that college graduates should earn
substantially less than high school graduates.
a. True
b. False
Empirical evidence indicates that imposing taxes on polluting emissions by firms
a. has no effect on the amount of pollution emitted.
b. does not give the government leeway to regulate more dangerous emissions
differently than less dangerous emissions.
c. does reduce the amount of pollution emitted.
d. discourages firms from investing in new methods of pollution abatement.
Over the last 30 years, the income gap between the rich and the poor has declined.
a. True
b. False
Figure 18-1
According to the graph in Figure 18-1, the increase in the amount that consumers pay as
a result of the tax is
a. 1000
b. 600
c. 400
d. indeterminate
Questions of what to produce, how much to produce, and who will get the output must
be faced by
a. market economies.
b. centrally planned economies.
c. the economies of underdeveloped countries.
d. all economies.
A shift in the supply curve of bicycles resulting from higher steel prices will lead to
a. higher prices of bicycles.
b. lower prices of bicycles.
c. a shift in the demand curve for bicycles.
d. larger output of bicycles.
e. no change in the price of bicycles.
Opportunity cost can best be defined as the
a. money cost of a good or service.
b. money cost plus interest on money borrowed to buy a good or service.
c. cost of the resources used to produce a good or service.
d. value of the best alternative forgone when the alternative at hand is chosen.
The quantity of labor supplied is dependent on the size of the working population and
the wage rate.
a. True
b. False
Private ownership of rivers and lakes will halt all water pollution.
a. True
b. False
Which of the following will tend to occur if price controls are imposed on a product?
a. persistent shortages
b. illegal markets
c. illicit channels of distribution
d. industry investment slows or stops
e. All of the above are correct.
What is marginal analysis?
What is the relevance of the marginal productivity principle in explaining the use of
inputs in production?
What is the difference between the absolute and relative concepts of poverty? What are
the major problems in measuring poverty with them?
Differentiate between the short run and the long run.
Economics is often described as a science of constrained choice. How do you justify
this argument?
Explain the relationship between the minimum wage and the unemployment rate for
teenagers.
The functioning of a market economy is very dependent upon investment for provision
of capital and future growth. Describe the process of investment and employment of the
created capital in production.
Illustrate the cost curves and average revenue (demand) curve for the perfectly
competitive firm in long-run equilibrium.