Fixed costs exist only in the:
A. long run when some inputs are fixed.
B. long run when all inputs are fixed.
C. short run when some inputs are fixed.
D. short run when all inputs are fixed.
Answer:
The practice of cream skimming, in the context of telephone services, involves:
A. providing service to low-cost areas and avoiding high-cost areas.
B. providing service to high-cost areas and avoiding low-cost areas.
C. providing universal service.
D. charging a high price to customers with an inelastic demand and a low price to
customers with an elastic demand.
Answer:
If the quantity demanded for a good rises as the price falls, the curve representing this
relationship will be:
A. upward-sloping.
B. downward-sloping.
C. horizontal.
D. impossible to determine.
Answer:
Which of the following is an example of the monitoring problem?
A. Government fails to stop firms hiring child labor to produce goods.
B. Two firms collude to set the market price, but the government cannot prove this
conclusively.
C. The managers of a firm maximize their own salaries to the detriment of maximizing
profit for the owner of the firm.
D. A firm does not take into account the air pollution caused by a coal factory when
pricing its product.
Answer:
A Lorenz curve that becomes less bowed out implies:
A. a change in income distribution toward more inequality.
B. no change in income distribution.
C. a change in income distribution toward more equality.
D. an increase in poverty.
Answer:
A natural monopoly occurs when a monopoly:
A. exists because significant economies of scale are present.
B. exists because the monopolist can produce a good at lower cost than anyone else.
C. is created by the federal government.
D. achieves a naturally efficient allocation of resources.
Answer:
Kraft Foods Inc.’s Folgers and Maxwell House coffees tend to be much more
price-elastic than Starbucks’ coffees. This information about elasticities is telling us
that:
A. Starbucks’ coffee is a luxury good, whereas the grocery brands are inferior goods.
B. Starbucks and the grocery brands are close substitutes.
C. Starbucks and the grocery brands are poor substitutes.
D. Starbucks’ customers are not as responsive to price changes as are the customers of
the Kraft brands.
Answer:
Refer to the graph shown. If the marginal cost external to the trade associated with the
use of gasoline is $0.10 per gallon, the point on the graph corresponding to the efficient
quantity and price is:
A. G.
B. H.
C. K.
D. L.
Answer:
Refer to the graph above. If suppliers can reduce output from M to L, the suppliers
excluded from the market will lose the producer surplus shown by area:
A. F.
B. D.
C. E.
D. E and F.
Answer:
The following graph shows average fixed costs, average variable costs, average total
costs, and marginal costs of production.
Refer to the graph shown. The distance EF represents:
A. average variable cost.
B. average total cost.
C. average fixed cost.
D. marginal cost.
Answer:
Repeated hurricanes in Florida have caused some retirees to choose to retire in Arizona
instead. Based on this information, retirement housing in Florida and that in Arizona are
what kinds of goods?
A. Florida housing has become an inferior good, and Arizona housing had been a
luxury good.
B. Florida housing has become a luxury good, and Arizona housing had been an inferior
good.
C. Florida housing and Arizona housing are substitutes.
D. Florida housing and Arizona housing are complementary goods.
Answer:
What kind of externalities affects the levels of unemployment, inflation, or growth in
the economy as a whole?
A. positive
B. negative
C. macroeconomic
D. microeconomic
Answer:
The free rider problem:
A. can never prevent pure public goods from being supplied.
B. results because people act unselfishly.
C. results because people behave irrationally.
D. prevents voluntary cost sharing from achieving the efficient output of a public good.
Answer:
Applying the concept of opportunity cost to the pollution of a lake, an economist
probably would conclude that:
A. all pollution in the lake should be eliminated regardless of cost.
B. no pollution in the lake should be eliminated regardless of benefit.
C. pollution should be eliminated as long as the benefit from a cleanup exceeds the
opportunity cost.
D. pollution should be eliminated as long as the opportunity cost of a cleanup exceeds
the cost of the resources required for the cleanup.
Answer:
Dating programs that match individuals such as Match.com and eHarmony.com are:
A. free-market pricing models.
B. government-implemented models.
C. coordinating mechanism designs.
D. auction markets.
Answer:
The resource curse is when:
A. a nation only has an inherent comparative advantage for one resource.
B. a nation only has a transferrable comparative advantage for one resource.
C. the discovery of a resource in a nation causes its currency to appreciate and thus
causes the nation to lose comparative advantages in other sectors.
D. a nation has neither an inherent nor a transferrable comparative advantage for any
resource.
Answer:
Refer to the graph shown. If the market price is $4, a perfectly competitive firm:
A. breaks even.
B. earns a profit.
C. incurs a loss but can still cover its variable costs and some of its fixed costs.
D. incurs a loss and cannot cover its variable costs.
Answer:
There would be no deadweight loss if:
A. demand was perfectly inelastic.
B. demand was perfectly elastic.
C. taxes collected were used for societal good.
D. demand was to shift by the amount of the tax.
Answer:
Global corporations:
A. can provide many benefits to the countries in which they operate.
B. are falling in importance in today’s economy.
C. have little interest in decreasing international tensions.
D. suffer tax disadvantages that domestic corporations do not.
Answer:
After a hurricane, several gas stations decide to keep their gas prices at the prehurricane
level. An economist who most likely believes that there has to be some rational reason
for this behavior is more than likely a(n):
A. irrational economist.
B. Keynesian economist.
C. traditional economist.
D. engineering economist.
Answer:
The faster marginal utility declines:
A. the greater the elasticity of demand.
B. the smaller the elasticity of demand.
C. the smaller the opportunity cost of the good.
D. the larger the opportunity cost of the good.
Answer:
For a monopolist, the point where the marginal revenue curve intersects the horizontal
axis is:
A. one-fourth of the distance between the origin and the point where the demand curve
intersects the horizontal axis.
B. located at the same point where the demand curve intersects the horizontal axis,
since for a monopolist, the demand curve and the marginal revenue curve overlap.
C. one-half the distance between the origin and the point where the demand curve
intersects the horizontal axis.
D. unable to be determined without knowing the location of the marginal cost curve.
Answer:
If Argentina imposes a 20 percent tax on natural gas exports to be paid by suppliers.
Other things equal, this causes the:
A. supply of natural gas exports to shift to the right.
B. supply of natural gas exports to shift to the left.
C. quantity of natural gas exports produced to increase.
D. demand for natural gas exports to shift to the right.
Answer:
To remedy unfairness in the distribution of income, many Americans look to all of the
following except:
A. affirmative action laws.
B. comparable worth laws.
C. social welfare programs.
D. regressive taxes.
Answer:
James enjoys gardening in the nude because he says it puts him in touch with nature.
His neighbors find his gardening routine very offensive, but James replies that they
should mind their own business and not watch him. To an economist this situation
illustrates the concept of:
A. the tragedy of the commons.
B. a negative externality.
C. a positive externality.
D. adverse selection.
Answer:
When people play the “ultimatum game,” in which one person gets to decide how to
split a sum of money by offering a share to another person and neither gets anything if
the second person rejects the offer, the result is often that the first person offers:
A. something close to 50-50, but the second person rejects this offer.
B. something close to 50-50, and the second person accepts this offer.
C. one cent, and the second person accepts this offer.
D. the full amount, and the second person accepts this offer.
Answer:
Refer to the following table.
If the price of one Weight Watchers frozen dinner is $2 and the price of one dozen jelly
doughnuts is $1, which of the following would Kent, a utility-maximizing consumer,
buy with his $6?
A. 3 frozen dinners
B. 2 frozen dinners and 2 dozen jelly doughnuts
C. 1 frozen dinner and 4 dozen jelly doughnuts
D. 6 dozen jelly doughnuts
Answer:
When a tax is progressive, the average tax rate:
A. decreases with income.
B. is constant with income.
C. increases with income.
D. first increases with income, then decreases with income.
Answer:
If government’s goal is to raise tax revenue and limit efficiency loss, taxation is most
effective when:
A. demand or supply is inelastic.
B. demand or supply is elastic.
C. demand is inelastic and supply is elastic.
D. supply is inelastic and demand is elastic.
Answer:
The text argues that the United States has had a comparative advantage in goods and
services that:
A. require creativity and innovation.
B. are artistic and well crafted.
C. are mass-produced.
D. are luxury goods.
Answer:
Behavioral economics emerged from the engineering approach to economics. This is
due to:
A. the lack of mathematics in engineering models.
B. the type of reasoning that was used in the design of engineering models.
C. the fact that shadow prices were used in the model.
D. the fact that traditional assumptions about behavior did not always fit reality.
Answer:
Richard Voith estimated the price elasticity of demand for round-trip rail fare to be 0.62.
If fares rose by 30 percent, one would expect the quantity of round-trip tickets
purchased to:
A. rise by 18.6 percent.
B. fall by 18.6 percent.
C. rise by 48.4 percent.
D. fall by 48.4 percent.
Answer:
Refer to the graph shown. Assuming a consumer has $5 to spend, if a soda costs $0.50
and a chocolate bar costs $0.50, the consumer will optimally choose to consume:
A. at point A.
B. at point B.
C. 10 cans of soda and 0 chocolate bars.
D. 0 cans of soda and 10 chocolate bars.
Answer:
A socialist economy in theory:
A. requires private ownership of property.
B. is coordinated by the invisible hand.
C. expects people to be altruistic.
D. expects people to be selfish.
Answer: