Consider two countries, Estonia and Ukraine. Estonia devotes a larger portion of its
production to capital. All other things equal which of the following statements is most
likely true?
A) Estonia is a poorer country than Ukraine.
B) Estonia will move up its production possibility curve faster than Ukraine.
C) Estonia’s production possibility frontier will shift up and out farther and faster than
Ukraine’s.
D) Ukraine is producing inside its production possibility frontier, whereas Estonia is
producing at a point on its production possibility frontier.
________ is a cost or benefit resulting from some activity or transaction that is imposed
or bestowed on parties outside the activity or transaction.
A) An externality
B) Marginality
C) Utility
D) A provisional injunction
For Elliot’s dog-walking service, the only variable input is labor. Elliot’s labor costs are
$300 a day and his service walks 30 dogs per day. To walk 31 dogs per day, his labor
costs increase to $305 a day. The marginal cost of walking that 31st dog is
A) $5.
B) $9.83.
C) $19.52.
D) indeterminate from the information given.
Table 2.1
Refer to Table 2.1. For Krystal, the opportunity cost of writing four TV commercials is
________ poems.
A) 2
B) 8
C) 16
D) 32
The government imposes a price floor on wheat that is below the market price. You are
asked to suggest a rationing scheme that will minimize the misallocation of resources.
You suggest
A) using rationing coupons that cannot be resold.
B) using rationing coupons that can be resold.
C) using a queuing system to compensate for the excess demand.
D) that no rationing system will be necessary.
The ________ is an example of a regressive tax.
A) individual income tax
B) tariff
C) sales tax
D) energy tax
Property income generally takes the form of all of the following EXCEPT
A) transfer payments.
B) interest.
C) profits.
D) dividends.
Because we ________ consume public goods, firms in the private sector may not
provide them because they ________ exclude those who do not pay.
A) individually; can
B) individually; cannot
C) collectively; can
D) collectively; cannot
Figure 15.2
Refer to Figure 15.2. The ________ quantity of perms for We Do Hair, a
monopolistically competitive firm, is 40.
A) profit-maximizing
B) loss-minimizing
C) breakeven
D) shut down
Table 16.6
Refer to Table 16.6. Assume that the marginal cost of hiring a police officer is $100. If
A and B are the only two people in the society, the optimal number of police officers is
A)1.
B)2.
C)3.
D) indeterminate from this information.
If a restaurant runs a special and sells a lobster dinner for $4.50, Amy buys one lobster
dinner a week. If lobster dinners are not on special and the price is $16.00, Amy buys
zero lobster dinners per week. Which of the following is true?
A) Amy’s demand for lobster is inelastic.
B) Amy’s marginal utility from a lobster dinner is less than $4.50.
C) The value of Amy’s marginal utility from a lobster dinner is at least $4.50 and less
than $16.00.
D) Amy’s marginal utility from a lobster dinner is greater than $16.00.
An increase in technology will cause a marginal revenue product of labor curve to
A) be unaffected because the productivity of labor has not changed.
B) shift to the left.
C) shift to the right
D) become more inelastic.
When a nation’s exports are less than its imports, it has a
A) trade surplus.
B) balanced trade.
C) trade shortage.
D) trade embargo.
The relationship between the price that a perfectly competitive firm can charge buyers
and the firm’s marginal revenue is that the price is ________ marginal revenue over all
output.
A) above
B) below
C) equal to
D) sometimes above and sometimes below
Figure 18.4
Refer to Figure 18.4. Suppose that the Lorenz curve ran along the horizontal axis to
100% of families, then became vertical to 100% of income. This would mean that
A) the distribution of income is perfectly equitable.
B) the distribution of income is completely inequitable.
C) only one family earned all the income.
D) the distribution of income is equal.
It always rains about an hour after you finish washing your car. Concluding that
washing your car caused it to rain is an example of the
A) fallacy of composition.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of inductive reasoning.
D) ceteris paribus conditions.
Figure 2.3
Refer to Figure 2.3. Assume that in this society the marginal rate of transformation of
sailboats for surfboards is constant and equal to -10. A graph of this society’s production
possibility frontier will be represented by
A) A.
B) B.
C) C.
D) D.
According to the theory of comparative advantage, a country ________ the goods in
which its has a comparative advantage.
A) exports
B) imports
C) exports and imports
D) does not trade
According to the Five Forces Model, the five competitive forces that determine the
level of competition and profitability in an industry are
A) rivals, buyers, suppliers, substitutes, and potential entrants.
B) rivals, consumers, labor, weather, and government.
C) buyers, suppliers, government, foreign competition, and weather.
D) rivals, government, foreign competition, labor, and weather.
The official poverty line in the United States is set ________.
A) equal to one-half the average income in the United States
B) at three times the cost of the Department of Agriculture’s minimum food budget
C) at three times the cost of the Department of Housing’s minimum housing allowance
D) at the amount necessary to allow an individual to buy the same market basket of
goods that the average urban wage earner can afford
The formula for total fixed cost is
A) TFC = TC + TVC.
B) TFC = TVC –TC.
C) TFC = TC/TVC.
D) TFC = TC –TVC.
The Oh So Humble Bakery sells 300 muffins at a price of $1 per muffin. Its explicit
costs for producing 300 muffins are $250. If the bakery is earning a normal rate of
return, then implicit costs must be
A) $50.
B) $100.
C) $250.
D) $350.
The ________ cost to society of producing an additional unit of a good or service is the
marginal social cost.
A) private
B) subsidized
C) total
D) damage
Figure 2.2
Refer to Figure 2.2. Microland is currently operating at Point B. You correctly deduce
that
A) in Microland, all resources are fully employed and there are no production
inefficiencies.
B) Microland has achieved a position of inefficiency.
C) Microland has recently experienced some type of technological breakthrough.
D) Microland has overcome the problem of scarcity.
The demand facing a monopolistically competitive firm is ________ a perfectly
competitive firm and ________ a monopolistic firm.
A) as elastic as; less elastic than
B) less elastic than; more elastic than
C) more elastic than; less elastic than
D) more elastic than; as elastic as
Figure 9.1
Refer to Figure 9.1. If this farmer maximizes profits, his per-bushel profit will be
A) $2.
B) $4.
C) $9.
D) $15.
A(n) ________ is a formal statement of a theory.
A) model
B) empirical measure
C) positive statement
D) causal statement
Capital goods yield benefits
A) as soon as the investment decision is made.
B) before they are put to use.
C) over their life spans.
D) in the present only.
Marginal damage costs most likely ________ as production increases.
A) remain constant
B) increase
C) decrease
D) decrease or increase
GM decides to build a new plant using retained earnings; all of the following are true
EXCEPT:
A) GM’s tangible capital will increase as a result.
B) GM is engaging in saving on behalf of its shareholders.
C) GM stock appreciates in value.
D) GM is avoiding experiencing opportunity costs.
Table 2.1
Refer to Table 2.1. Which of the following statements is true?
A) Krystal has a comparative advantage in both writing TV commercials and writing
poems.
B) Mark has a comparative advantage in both writing TV commercials and writing
poems.
C) Krystal has a comparative advantage in writing TV commercials, and Mark has a
comparative advantage in writing poems.
D) Mark has a comparative advantage in writing TV commercials, and Krystal has a
comparative advantage in writing poems.
In 2006 the Texas Two Step lottery had hit an all-time high jackpot of $2.9 million. If
the odds of winning the jackpot are 1.8 million to one and the cost of one lottery ticket
is $1.00 is this a fair game? Explain.
What does it mean to internalize an externality?
Comment on the following statement: “When there are no externalities present, the
level of output for a private good produced by a perfectly competitive firm is efficient.”
What is a tariff?
In what way does land differ from other inputs such as labor and capital?
Define what is meant to be risk-neutral
Explain why lower interest rates can stimulate investment by businesses. Show this on a
graph.
What is Supplemental Security Income?
Assume a distant tribe only harvests breadfruit and its entire livelihood depends on it. If
the price of breadfruit were to rise suddenly how might it be possible that this tribe
would actually consume more breadfruit?
What would be the economic dangers of eliminating patent protection in the
pharmaceutical industry as a means of “eliminating monopoly power”?
What is the maximum a monopolist would be willing to spend on rent-seeking
behavior?
Your friend Harry has quit his $20,000-a-year job to start a business that rents fishing
boats. He asks you to lend him $50,000 and agrees to pay you a 10% return on your
$50,000 if he earns a profit. During the first year Harry’s total revenue is $120,000 and
his total cost for equipment and supplies are $100,000. Harry tells you that he cannot
pay you any interest this year because he did not earn a profit. Is your friend Harry
trying to cheat you?
How might the existence of federally funded programs for the poor reduce the amount
of charitable giving?
Before investing what should investors evaluate first?