If the marginal resource cost of the tenth worker hired by a firm is $4 and the wage of
the tenth worker is $3, the firm will hire ten workers if the marginal revenue product of
the tenth worker is
a. $3
b. less than $3
c. greater than or equal to $3
d. greater than or equal to $4
e. less than $4
The law of comparative advantage does not apply to
a. entire nations
b. natural resources like air and sunshine
c. individuals
d. firms
e. regions of a country
Which of the following is not true about taste for work?
a. Everyone ends up in her or his most preferred job
b. The transaction costs of job information and of changing jobs may prevent some
desirable matchups
c. Workers seek jobs in a way that tends to minimize the disutility of work
d. Economists argue that your preferences are stable and you supply more labor to jobs
you like
e. Economists do not try to explain how work preferences develop
Exhibit 9-5
Optimal output and price for the nondiscriminating monopolist in Exhibit 9-5 are
a. 90 and $18
b. 1,500 and $24
c. 1,700 and $22
d. 1,100 and $28
e. 1,500 and $22
Exhibit 6-24
Which point on curve I1 in Exhibit 6-24 yields the most utility?
a. point a
b. point b
c. point e
d. point f
e. All points on curve I1 yield the same utility.
In a labor market dominated by a union, the supply of labor to a firm is depicted as a
horizontal line.
a. True
b. False
Exhibit 15-5
Consider the natural monopoly depicted in exhibit 15-5. What is the socially efficient
level of output?
a. 4 units
b. 5 units
c. 6 units
d. 7 units
e. 8 units
The McDonald’s restaurants in Russia grow their own potatoes to guarantee that they
are grown correctly. Growing potatoes is very different from running a fast-food
restaurant. One could say of McDonald’s decision to grow its own potatoes for the
Russian franchise that
a. the bounded rationality criterion outweighs the need for quality control
b. the bounded rationality criterion is outweighed by the need for quality control
c. both bounded rationality and the need for quality control are factors that make it
rational for McDonald’s to grow its own potatoes
d. growing potatoes is irrational
e. there must not be many potato suppliers in Russia
Contractionary policies help correct a balance of payments deficit by
a. lowering domestic incomes but raising demand for imports
b. raising domestic incomes but lowering demand for imports
c. raising both domestic incomes and demand for imports
d. lowering both domestic incomes and demand for imports
e. lowering interest rates and increasing aggregate spending
Exhibit 5-8
Which of the following statements is true in the range of the total revenue curve labeled
B in Exhibit 5-8?
a. Demand is elastic.
b. Demand is inelastic.
c. Demand is unit elastic.
d. We cannot tell anything about elasticity of demand because this is a total revenue
curve.
e. Demand is perfectly elastic.
Leisure time is not subject to diminishing marginal utility.
a. True
b. False
The difference between an import quota and a tariff that results in the same domestic
price is
a. none; they are the same
b. the quantity demanded is higher under the tariff
c. the world price is higher under the quota
d. the tariff revenue goes to the domestic government; quota benefits may go to
foreigners
e. none because both quotas and tariffs are illegal
Exhibit 4-3
If the price of the good described in Exhibit 4-3 is $1.40, then there is a
a. shortage of 30 units
b. surplus of 30 units
c. shortage of 20 units
d. surplus of 20 units
e. surplus of 10 units
The slope of a budget line is positive.
When a firm is operating at its minimum efficient scale, its
a. short-run average total cost of production is minimized
b. long-run marginal cost of production is minimized
c. long-run average cost of production is minimized
d. long-run profit is maximized
e. profit is at a maximum
According to the special interest theory,
a. economic regulation is designed to promote social welfare
b. producers may be able to influence regulators to impose restrictions favorable to
producers
c. groups of consumers with special interests may be able to control a regulatory agency
to their own benefit
d. foreign lobbyists may be able to control a regulatory agency to their own benefit
e. the fighting between special interest groups over economic regulation may cancel out
effects of such regulation
Which of the following is an example of roundabout production?
a. A farmer switches from growing soybeans to growing wheat, getting fewer crops per
year as a result.
b. A farmer switches from growing soybeans to growing wheat, getting more crops per
year as a result.
c. A self-employed dressmaker becomes a wage worker at a factory that makes dresses.
d. A coal mine is sold by its owners to its workers and run as a cooperative.
e. A telemarketing firm declares a holiday for two days while a new phone system is
installed.
Exhibit 2-2
According to Exhibit 2-2, if Hans types one fewer page, how many loads of laundry can
he do in the time saved on typing?
a. 12 loads
b. 8 loads
c. 3/2 of a load
d. 2/3 of a load
e. it cannot be determined
Foreign exchange rates tend toward equality around the world because of the actions of
a. central banks
b. stock markets
c. commodity markets
d. the World Bank
e. arbitrageurs
Which of the following groups benefits from regulation, according to the special
interest theory of regulation?
a. all consumers
b. all producers
c. only certain consumers
d. only certain producers
e. society as a whole
Exhibit 4-2
Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following
would shift the supply curve for milk from S1 to S0?
a. a decrease in the price cattle feed
b. the expectation of a higher price in the near future
c. an increase in the price of milk
d. an increase in the price of beef
e. a new and improved cattle food that increases the yield per dairy cow
Every economy must answer each of the following questions except one. Which is the
exception?
a. Which goods will be produced?
b. Why are these particular goods produced?
c. Which resources should be used?
d. How should resources be combined to produce each product?
e. Who will actually consume the goods produced?
If a publishing company purchases faster computers to speed up word processing,
a. the marginal product of its editors will increase, which will shift the demand for
editors to the right
b. the marginal product of its editors will increase, which will shift the demand for
editors to the left
c. the wages of its editors will increase, which will shift the demand for editors to the
right
d. the wages of its editors will decrease, which will shift the demand for editors to the
right
e. the supply of editors will decrease
Exhibit 19-9
If the country in Exhibit 19-9 is initially trading without restrictions at a world price of
$2.00 and an import quota of 50 units per month is enacted, the gain to those awarded
the right to import the 50 units and sell it at the new domestic price is represented by
area
a. a
b. b
c. c
d. d
e. c + d
Truck drivers usually earn more than secretaries because
a. drivers require more education and training
b. truck drivers have more flexibility in their daily activities
c. truckers face greater risks
d. secretaries have higher productivity than truckers
e. truckers are discriminated against
__________ utility is constant along a given indifference curve.
a. Marginal
b. Average
c. Total
d. Incremental
e. Mean
Which of the following is not an example of the fallacy of composition?
a. If I can get to work fastest by taking the interstate, so can everyone else.
b. If you can only get away from it all by going to Fairbanks, everyone who needs to
get away should go to Fairbanks.
c. If the quickest way to get off a sinking ship is to run to the nearest lifeboat, all the
passengers should do this.
d. If the best TV reception can be gotten with a Couch Potato antenna, then everyone
should have a Couch Potato antenna.
e. If I can get a better view by standing up at the baseball game, everyone gets a better
view by standing up.
The price elasticity of demand is equal to the slope of the demand curve.
a. True
b. False
Suppose a professor gives up her teaching job to devote her time to writing textbooks.
If salaries of professors rise,
a. her accounting profit will rise
b. her accounting profit will fall
c. her explicit costs will rise
d. her economic profit from textbooks will fall
e. her economic profit from textbooks will rise
Suppose that firms in a monopolistically competitive industry are earning short-run
economic profits. In the long run, the demand curve facing each individual firm can be
expected to
a. shift to the left and become flatter
b. shift to the left and become steeper
c. shift to the right and become flatter
d. shift to the right and become steeper
e. remain constant
The establishment of GATT resulted in
a. lower tariff rates
b. increased tariff rates
c. decreases in total world trade
d. increased protectionism
e. a rise in the price of imports
The market demand curve for a public good
a. is the horizontal sum of all individual demand curves
b. is the vertical sum of all individual demand curves.
c. is upward sloping
d. is horizontal
e. does not exist
Household production is more likely to occur when
a. it requires many specialized resources
b. technology makes it more costly than market production
c. tax avoidance is desirable
d. less control over the final product is desirable
e. the opportunity cost of household production is high