Price discrimination leads to higher prices for all consumers.
a. True
b. False
Many large universities rent out parts of their campuses to conference groups during the
summer because such groups cause little damage, require little staff attention, and bring
in large amounts of income. A university’s decision to rent its campus to a conference
group is most clearly based on
a. the idea that price and quantity selection is a single decision.
b. the principle of decreasing returns to scale.
c. marginal analysis.
d. average cost considerations.
The payoff matrix is a fundamental tool of
a. monopolistic competition.
b. game theory.
c. corporate finance theory.
d. regulatory oversight.
Figure 11-8
Given the average cost curve shown in Figure 11-8 for dry cleaning, where Q1 is the
quantity demanded in a small town, and Q2 for a larger town, you would expect dry
cleaning to be a monopoly
a. in a small town, but not a large one.
b. in both large and small towns.
c. in a large town, but not a small one.
d. only if the process is patented.
Environmentalists, politicians, and economists have different perspectives on what
constitutes appropriate environmental policy. Which of the following statements was
probably made by an economist?
a. “We take the position that there are rights involved here, rights to be protected from
threats to your health, regardless of the costs involved.”
b. “Protecting the environment is so important that standards cannot be too high, and
continuing improvements must be made regardless of cost.”
c. “Pollution is a moral issue that cannot be reduced to dollars and cents.”
d. “Clean air and water are things we can buy-if the price is right.”
An inferior good is one that consumers buy in smaller quantities when incomes rise.
a. True
b. False
An accurate demand curve can be derived by examining the quantities of a good that
are sold over time as the price varies.
a. True
b. False
Figure 3-1
According to Figure 3-1, the opportunity cost of one more bushel of wheat is
a. higher at B than at D.
b. lower at B than at D.
c. equal at B and D.
d. impossible to determine from the information given.
Which of the following experiments will yield observations that would allow one to
calculate the marginal physical product of labor?
a. increase the number of lumberjacks with chain saws and observe the change in output
of cut trees
b. increase the number of workers on an assembly line and record the change in output
c. Both a and b are correct.
d. Neither a nor b are correct.
What is true for monopoly that is not true for perfect competition?
a. The industry demand curve is downward sloping.
b. Profit is maximized where MR = MC.
c. The firm and the industry are exactly the same entity.
d. Positive economic profits may be earned in the short run.
Regarding the causes of pollution, economists believe that:
a. the pricing system has failed.
b. the public interest requires that pollution to be reduced below its market level.
c. a firm pollutes the air and water because they are free.
d. All of the above are correct.
In the short run the firm has at least one fixed input.
a. True
b. False
If the marginal utility of a gallon of milk to consumers is $2.50 and the MC of
producing the gallon of milk is $1.50, then
a. the value of the resources used up in producing one more gallon of milk would be $1
less than the money value of the additional gallon to consumers.
b. society could be made better off by expanding the output of milk.
c. resources are not being used most efficiently.
d. All of the above are true.
A roller coaster operator produces thrill-packed rides using electricity and a roller
coaster. For the roller coaster operator, electricity is
a. an opportunity cost.
b. a variable cost.
c. a fixed cost.
d. a sunk cost.
The marginal productivity principle has some relevance to organizing production in a
socialist society.
a. True
b. False
The price for labor is the wage rate. What happens to the demand for labor if wages
increase?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain-economic theory has no answer to this question.
Marginal utility can fall even as total utility from the consumption of a good is rising.
a. True
b. False
USX, a steel company, reduced the number of man-hours required to produce a ton of
steel from 10,8 in 1982 to 3,8 in 1990, thereby eliminating 55,000 jobs. Technically,
this rise in productivity means the
a. marginal product of labor increased.
b. average product of labor increased.
c. average product of capital fell.
d. marginal product of capital fell.
Laissez-faire refers to a situation in which there is ____ with the workings of the market
system.
a. zero consumer involvement
b. zero government interference
c. minimal government interference
d. complete government interference
The law of comparative advantages explains why
a. advanced nations will not trade with less-developed countries.
b. an advanced nation will not trade with other countries.
c. less-developed countries only trade among themselves.
d. nations trade with each other, regardless of their relative levels of economic
development.
e. nations erect trade barriers.
What is the controversy surrounding property taxes as a source for school funding?
Monopolistic competition tends to lead firms to have wasted capacity. Why?
Why is oligopoly more difficult to model than competition or monopoly?
The declared purpose of antitrust policy is to promote competition, yet some would say
it actually may prevent competition. Explain the two sides of the debate.
In perfect competition, one result of the model was that there were no economic profits
in the long run. In a monopoly, the firm typically earns a positive economic profit. Why
is there this difference?
Describe the process that would occur in the long run in a competitive industry if there
were economic profits. Illustrate this with a diagram.