If a firm’s average cost is currently $100, and the marginal cost is $95, then the average
cost is currently falling.
a. True
b. False
A small increase in productivity growth can have a huge impact on a country’s standard
of living.
a. True
b. False
The U.S. economy rarely grows.
a. True
b. False
Economies of scale lead to declining long-run average cost curves.
a. True
b. False
Most entrepreneurs are self-employed.
a. True
b. False
Firms in a perfectly competitive market produce at minimum average cost in the short
run and the long run.
a. True
b. False
Bond prices and interest rates:
a. are interrelated
b. have no relationship to one another
c. rise or fall in tandem
d. none of these choices
In Japan, the market value of the land is approximately four times that of all the land in
the United States, even though Japan is only about the size of California. The most
likely explanation for this fact is
a. greater demand for land in Japan relative to the supply than in the United States.
b. land is very productive in Japan.
c. land is not fixed in supply in the United States.
d. Japanese workers are very productive.
An industry that generates detrimental externalities will have a marginal social cost
higher than the marginal private cost to the industry.
a. True
b. False
Opening trade between a nation that has “cheap labor” and one that has “expensive
labor” will
a. lower the standard of living in both countries.
b. raise the standard of living in both countries.
c. make some workers less efficient.
d. lead to an inappropriate allocation of resources.
The marginal tax rate has less effect on economic incentives than does the average tax
rate.
a. True
b. False
Monopolies are always large firms with great economies of scale.
a. True
b. False
Unlike a perfectly competitive firm, a monopolist
a. can choose how much output to produce.
b. cannot increase production without affecting the price she receives for her good.
c. usually sells in a market with a downward-sloping demand curve.
d. has an MR from increasing output by one unit equal to the price of his product.
The government enacted minimum wage legislation to protect skilled workers.
a. True
b. False
The distribution of income in the United States has grown substantially more unequal
since about:
a. 1970
b. 1980
c. 1990
d. 2000
Minimum wage legislation
a. has little effect on university professors.
b. raises incomes of unskilled laborers who have jobs.
c. prevents some willing workers from getting jobs.
d. All of the above are true.
When box lunches are handed out at an elementary school, Jimmy (who loves chocolate
and hates raisins) gets a raisin cookie and Johnny (who hates chocolate and loves
raisins) gets a chocolate chip cookie. This is an example of inefficiency in
a. output selection.
b. production planning.
c. product distribution.
d. market segmentation.
According to the data on real U.S. GDP,
a. economic growth has been irregular, with periodic downturns.
b. economic growth has been consistent, with few downturns.
c. economic growth has been extremely rapid, but with major collapses.
d. economic growth has been elusive, but downturns have been eliminated.
Monopolistic competition is different from perfect competition in that every
manufacturer
a. has a small monopoly, and differentiates the product.
b. takes the product quality as given, and chooses price.
c. takes output level as given, but must choose price.
d. differentiates product, but cannot advertise successfully.
If long-term investments are increasing,
a. current consumption must be increasing.
b. interest rates must be relatively low.
c. interest rates must be relatively high.
d. the people must be experiencing a “defective telescopic faculty.”
A demand schedule shows the time over which different quantities will be demanded.
a. True
b. False
Cost minimization requires that a firm equate the ratio of marginal products of inputs to
the ratio of input prices.
a. True
b. False
The marginal productivity principle has relevance only in a capitalist economy, and not
in a socialist system.
a. True
b. False
The Federal Trade Commission was established in the 1930s under President Franklin
D. Roosevelt.
a. True
b. False
The best hope for continued growth of the U.S. economy probably lies in:
a. a return of manufacturing to the U.S.
b. innovation
c. patents
d. decreasing poverty