If the United States is a “net borrower” from abroad,
A) the United States must be exporting more than it is importing.
B) net capital flows must be negative.
C) domestic saving is less than domestic investment.
D) net foreign investment must be positive.
The processes a firm uses to turn inputs into outputs of goods and services is called
A) technology.
B) technological change.
C) marginal analysis.
D) positive economic analysis.
Which of the following is an example of the U.S. government’s use of a “command and
control” approach to reducing pollution?
A) In 1990, Congress approved measures designed to reduce sulfur dioxide emissions
to 8.5 million tons annually by 2010.
B) The U.S. government imposed a tax on electric utilities to reduce damages from acid
rain.
C) The government issued electric utilities tradable emissions allowances in order to
reduce emissions of nitrogen oxide.
D) In the 1980s, the U.S. government required the installation of catalytic converters to
reduce emissions from all new automobiles.
How are corporate profits taxed in the United States?
A) Earnings are taxed first by state sales taxes and then as corporate profits at the
Federal level.
B) Earnings are taxed first as personal income then as corporate profits at the Federal
level.
C) Earnings are taxed first as corporate profits then as personal income after dividends
are paid.
D) Corporate profits are not taxed at all.
In economics, the term ________ means “additional” or “extra.”
A) allocative
B) marginal
C) equity
D) optimal
Financial contributions to the campaigns of members of Congress, state legislators and
other elected officials by firms that seek special interest legislation that make the firms
better off are
A) examples of rent seeking.
B) illegal.
C) the result of the voting paradox.
D) irrational because elected officials will almost always act in the interest of the voters
who have to pay the cost of the legislation.
Figure 13-5
The candy store represented in the diagram is currently selling Qa units of candy at a
price of Pa. Is this candy store maximizing its profit and if it is not, what would you
recommend to the firm?
A) Yes, it is maximizing its profit by charging the highest price possible.
B) No, it is not; since its marginal cost is constant, it should produce and sell as much
candy as it can. It should sell Qd units at a price of Pd.
C) No, it is not; it should lower its price to Pc and sell Qc units.
D) No, it is not; it should lower its price to P and sell Q units.
In the United States, out-of-pocket spending on health care per person
A) has been rising since 1965.
B) has been falling since 1965.
C) has remained fairly steady since 1965.
D) fell from 1965 through 1995, then began to rise from 1995 to the present.
The demand curve for each seller’s product in perfect competition is horizontal at the
market price because
A) each seller is too small to affect market price.
B) the price is set by the government.
C) all the sellers get together and set the price.
D) all the demanders get together and set the price.
Figure 5-8
Consider a chemical plant that discharges toxic fumes over a nearby community. To
reduce the emissions of toxic fumes the firm can install pollution abatement devices.
Figure 5-8 shows the marginal benefit and the marginal cost from reducing the toxic
fumes emissions. Suppose the emissions reduction target is currently established at 8
million tons. What is the area that represents the cost of eliminating an additional 1
million tons?
A) A
B) B + C
C) A + B
D) A + B + C
Table 2-31
This table shows the number of labor hours required to produce a cell phone and a
board foot of lumber in Estonia and Finland. a. Which country has an absolute
advantage in the production of cell phones?
b. Which country has an absolute advantage in the production of lumber?
c. What is Estonia’s opportunity cost of producing one cell phone?
d. What is Finland’s opportunity cost of producing one cell phone?
e. What is Estonia’s opportunity cost of producing one board foot of lumber?
f. What is Finland’s opportunity cost of producing one board foot of lumber?
g. If each country specializes in the production of the product in which it has a
comparative advantage, who should produce cell phones?
h. If each country specializes in the production of the product in which it has a
comparative advantage, who should produce lumber?
Efficiency wages cause unemployment because
A) firms pay wages that are below the market wage, causing the quantity of labor
demanded to be greater than the quantity of labor supplied.
B) firms pay wages that are below the market wage, causing the quantity of labor
demanded to be less than the quantity of labor supplied.
C) firms pay wages that are above the market wage, causing the quantity of labor
demanded to be greater than the quantity of labor supplied.
D) firms pay wages that are above the market wage, causing the quantity of labor
demanded to be less than the quantity of labor supplied.
If society decides it wants more of one good and ________, then it has to give up some
of another good and incur some opportunity costs.
A) technology advances
B) resources are underutilized
C) all resources are fully utilized
D) new resources are discovered
Which of the following best illustrates the free rider problem?
A) Since no one owns elephants and elephants are valued for their hide, meat and ivory,
elephants can be hunted to extinction.
B) For every purchase of a $30 fare card, you are entitled to five free bus rides.
C) If your neighbors professionally landscape their front yards, it is likely that the
market value of your property will increase.
D) All three homeowners in a quiet cul-de-sac have expressed the desirability of
security lighting in the common parking area. One of the homeowners installs the
lighting and asks you to contribute toward the cost. You choose not to contribute.
Suppose when Nablom’s Bakery raised the price of its breads by 10 percent, the
quantity demanded fell by 15 percent. What was the effect on sales revenue?
A) Sales revenue increased.
B) Sales revenue remained unchanged.
C) Sales revenue decreased.
D) It cannot be determined without information on prices.
Figure 4-2
What area represents the decrease in producer surplus when the market price falls from
P2to P1?
A) C + E
B) A + C + E
C) A + B
D) B + D
Table 16-3
Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the
demand for this service. Assume that each person surveyed demands only one hour of
pet sitting services per period. Table 16-3 above shows a portion of her survey results.
Suppose Julie’s marginal cost of providing this service is constant at $7 and she charges
$7. What is the value of the consumer surplus enjoyed by her customers?
A) $39
B) $28
C) $11
D) $0