The largest portion of federal government revenues comes from ________.
A) the individual income tax
B) excise taxes
C) social insurance payroll taxes
D) corporate income taxes
If income decreases by 20% and, in response, the quantity of housing demanded
decreases by 14%, then the income elasticity of demand for housing is
A) -1.
B) -0.7.
C) 7.
D) 43.
When a large amount of output is produced per unit of the input, the input is said to
exhibit
A) high productivity.
B) low productivity.
C) marginal productivity.
D) derived productivity.
A clothing manufacturer produced 5,000 sweaters, but sold only 4,000 of them. The
remaining 1,000 sweaters would be classified as
A) a loss to the firm.
B) part of the firm’s tangible capital.
C) part of the firm’s intangible capital.
D) a factor of production.
Table 19.1
Relating to the Economics in Practice on page 392: Refer to Table 19.1. At an income
level of $60,000, the average tax rate is
A) 5%.
B) 67%.
C) 15%.
D) 5%.
A firm will continue hiring labor as long as the MRP of labor ________ the market
wage rate.
A) is greater than or equal to
B) is less than
C) is equal to
D) determines
Firms can ________ their ________ costs in the short run.
A) change; fixed
B) not change; fixed
C) change; overhead
D) not change; variable
A new technology is developed for producing solar panels that reduces production costs
by 40%. Which of the following is true?
A) Firms will continue to operate efficiently as long as no firm adopts this new
technology.
B) Firms must adopt this new technology for the economy to remain efficient.
C) This new technology will not affect efficiency, but it will change the equilibrium
price and quantity for this industry.
D) If firms do not adopt this new technology, then the economy will remain in general
equilibrium, because firms will not change their price and output decisions.
Table 7.2
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.2. Which technology is the most labor intensive?
A) A
B) B
C) C
D) D
Samurai Sam’s, a producer of frozen sushi, is a monopolistically competitive firm. The
firm is currently selling frozen California rolls at a $4 price. Samurai Sam’s marginal
cost is $1.75 and its marginal revenue is $1.50. The firm should ________ to maximize
profits in the short run.
A) increase output to where price just equals marginal cost
B) decrease output to where price just equals marginal cost
C) continue to produce the same output level
D) Indeterminate from the given information.
For a monopoly, the marginal revenue curve has ________ point(s) in common with the
firm’s linear demand curve.
A) one
B) no
C) all
D) Indeterminate from the given information.
Which of the following would be the most likely result if high-speed rail service were
introduced to an area and made commuting from that area easier?
A) The cost of living far from one’s workplace would rise, and the value of land would
increase.
B) The cost of living far from one’s workplace would rise, and the value of land would
decrease.
C) The cost of living far from one’s workplace would drop, and the value of land would
increase.
D) The cost of living far from one’s workplace would drop, and the value of land would
decrease.
When Burger Barn hires one worker, 10 customers can be served in an hour. When
Burger Barn hires two workers, 25 customers can be served in an hour. The marginal
product of the second worker is ________ customers served per hour.
A) 15
B) 30
C) 40
D) 5
Because marginal revenue product reflects productivity, increases in productivity
directly shift
A) input supply curves to the left.
B) input demand curves to the left.
C) input supply curves to the right.
D) input demand curves to the right.
If the price of a truck in the United States is $25,000, and the exchange rate between the
dollar and the euro falls from $1.50 to $1.30 per euro, then the price of the American
truck in the EU will
A) rise.
B) fall.
C) remain the same.
D) be irrelevant, because the EU will impose restrictions on imports from the United
States.
Figure 4.5
Refer to Figure 4.5. If a $10.00 per CD-Rom drive tax is levied on imported CD-Rom
drives, the United States will
A) import 3 million CD-Rom drives.
B) import 6 million CD-Rom drives.
C) import 9 million CD-Rom drives.
D) import 12 million CD-Rom drives.
Table 8.1
Refer to Table 8.1. Assuming the price of capital (K) is $10 per unit and the price of
labor (L) is $5 per unit, the lowest long-run total cost of producing one unit of output is
A) $8.
B) $50.
C) $60.
D) $110.
At the Pampered Pet Salon the marginal products of the first, second, and third workers
are 50, 36, and 25 dogs washed, respectively. The total product (number of dogs
washed) of the first two workers is
A) 11.
B) 50.
C) 86.
D) 111.
If you observe that Kelly Clarkson won American Idol 3 years before Carrie
Underwood won, and you conclude that Kelly Clarkson winning caused Carrie
Underwood to win 3 years later, you would be guilty of an error called the
A) fallacy of inductive reasoning.
B) fallacy of ceteris paribus.
C) fallacy of composition.
D) post hoc, ergo propter hoc fallacy.
Monopolistic competition is an industry market structure with
A) a single firm in which the entry of new firms is blocked.
B) a small number of firms each large enough to impact the market price of its output.
C) many firms each able to differentiate their product.
D) many firms each too small to impact the market price of its output.
Figure 4.3
Refer to Figure 4.3. Retailers will have an excess supply of pencils if the government
will not allow retailers to charge less than ________ for a pencil.
A) $0.50
B) $0.45
C) $0.40
D) the equilibrium price
Figure 15.4
Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $75 and is a
monopolistically competitive firm. If this firm is attempting to maximize profits, the
firm’s profit is
A) -$175.
B) -$100.
C) -$75.
D) $0.
An externality is
A) a cost or benefit resulting from some activity or transaction that is imposed or
bestowed on parties outside the activity or transaction.
B) the total cost to society of producing an additional unit of a good or service.
C) the amount a consumer pays to consume an additional amount of a particular good.
D) a problem intrinsic to public goods: The good or service is so costly that its
provision generally does not depend on whether or not any single person pays.
Production decisions are centralized in a
A) laissez-faire economy.
B) command economy.
C) invisible-hand economy.
D) utopian economy.
Figure 2.4
According to Figure 2.4, the point where only motorcycles are produced is
A) A.
B) B.
C) C.
D) E.
Suppose the demand for lawnmowers goes down when the price of gasoline goes up.
We can say that these two goods are
A) complements.
B) substitutes.
C) unrelated goods.
D) perfect substitutes.
Monopolies can ________ in the long run while monopolistically competitive firms
________, due to barriers to entry in monopoly but not in monopolistic competition.
A) break even; cannot
B) earn positive economic profits; cannot
C) only break even; can only earn positive economic profits
D) can never shut down; can
In 2012, the world population grew to ________ people.
A) over 6.9 billion
B) just under 17 billion
C) approximately 32 billion
D) almost 1 trillion
Table 20.1
Refer to Table 20.1. In Guatemala, the opportunity cost of 1 bushel of oranges is
A) 1/2 bushel of bananas.
B) 1 bushels of bananas.
C) 2 bushel of bananas.
D) 4 bushels of bananas.
Table 20.1
Refer to Table 20.1. Chile has
A) a comparative advantage in beer production.
B) an absolute advantage in beer production.
C) an absolute advantage in wine production.
D) a comparative advantage in wine production.
For a monopoly, the marginal revenue curve has ________ point(s) in common with the
firm’s demand curve.
A) one
B) no
C) all
D) Indeterminate from the given information.
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume
that each firm emits 5 units of pollution.
Table 16.4
Refer to Table 16.4. Suppose the government wants to reduce the total amount of
pollution from the current level of 10 to 4. To do this, the government caps each firm’s
emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade
permits and all possible trades are made, Firm A will reduce its pollution by a total of
________ units.
A) 2
B) 3
C) 4
D) 5
Figure 1.3
Refer to Figure 1.3. The slope of the line is
A) negative.
B) increasing at a decreasing rate.
C) decreasing at an increasing rate.
D) positive.
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume
that each firm emits 5 units of pollution.
Table 16.4
Refer to Table 16.4. Suppose the government wants to reduce the total amount of
pollution from the current level of 10 to 4. To do this, the government caps each firm’s
emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade
permits, how many permits will be traded between the two firms?
A) A will buy two permits from B.
B) B will buy two permits from A.
C) A will buy one permit from B.
D) B will buy one permit from A.
The data below shows the relationship between total output and the amount of labor
hired at Jack’s Quick Lube Station:
Does the production function in the table above exhibit diminishing returns? Explain.
What role can the government play in correcting for externalities?
Some politicians have recently suggested changing the income tax system in the U.S. to
a flat tax system where all taxpayers would pay the same percentage of their income in
tax to the federal government. Explain how such a change can be analyzed in terms of
efficiency. Do you believe that this tax will have equity effects as well?
Suppose that the price of a pound of potatoes increases from $0.75 to $0.90. Use the
midpoint formula to calculate the percentage change in price.
In economics, what is meant by investment?
Economists will often argue that an individual trade barrier designed to help a
particular industry will work even though on net it won”t help the economy as a whole.
Explain what this means.
Explain Ricardo’s theory of comparative advantage.
What is the drop-in-the-bucket problem?
How is capital valued?
If leisure is a normal good and the economy expands so that national income rises by
3% next year then theoretically what ought to happen to the amount of work that should
take place?
What are Medicaid and Medicare?
What is the formula for the present value of $1 one year from now? If the rate of
interest is 5 percent, what is the present value of $10 to be paid one year from now?
Draw a graph showing the demand curve faced by a perfectly competitive firm. On the
same graph, draw the demand curve faced by a monopolistically competitive firm.
List the three main sources of economic development.
Precisely what is meant by economic income?
Suppose that Rosie and Betty spend their free time making cakes and cookies. Is it
possible for Betty to have an absolute advantage in the production of both cakes and
cookies? Is it possible for Betty to have a comparative advantage in the production of
both cakes and cookies? Explain.
Explain the law of supply. What does the law of supply imply about the shape of the
supply curve?
What are liability rules?
The table below represents five points on the production possibility frontier for the
small country of Ponderosa, which produces only cowboy boots (measured in
thousands of pairs) and saddles (measured in thousands):
What is the opportunity cost of moving from point A to point B? What is the
opportunity cost of moving from point D to point C?