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If the Herfindahl-Hirschman Index of an industry is less than 1,000, then the Antitrust
Division of the Justice Department
A) will challenge any merger that would increase the index by over 100 points.
B) considers the industry unconcentrated.
C) considers the industry already concentrated.
D) will challenge any merger that raises the index by more than 50 points.
In order to have ________ distribution of final products to households, free and open
markets are essential.
A) an efficient
B) an equitable
C) a fair
D) All of the above are correct.
The demand curve for an input will slope downward because of
A) the factor substitution effect.
B) the output effect.
C) decreasing returns to scale.
D) both A and B
Consider two countries, Japan and Malaysia. Japan devotes a smaller portion of its
production to capital. All other things equal, which of the following statements is most
likely true?
A) Japan is a poorer country than Malaysia.
B) Japan will move up its production possibility curve faster than Malaysia.
C) Malaysia is producing inside its production possibility frontier, whereas Japan is
producing at a point on its production possibility frontier.
D) Malaysia's production possibility frontier will shift up and out farther and faster than
Japan's.
________ relates to the idea that collective ownership may not provide the proper
private incentives for efficiency because individuals do not bear the full costs of their
own decisions, but enjoy the full benefits.
A) Collective bargaining
B) The communal-living compact
C) The tragedy of commons
D) The Communist Manifesto
Table 3.1
Refer to Table 3.1. In this market there will be an excess supply of 600 pizzas at a price
of
A) $3.
B) $6.
C) $12.
D) $15.
When a household lends money directly to a firm, the firm gives the household a
A) share of stock.
B) certificate of investment.
C) bond.
D) dividend.
The income elasticity of demand
A) measures the change in income necessary for a given change in quantity demanded.
B) measures the responsiveness of income to changes in quantity demanded.
C) measures the responsiveness of quantity demanded to changes in income.
D) is the ratio of the percentage change in income to the percentage change in quantity
demanded.
For each of the following, note whether the statement is an example of positive
economic analysis or an example of normative economic analysis:
(a.) An increase in the minimum wage will lead to a higher rate of teenage
unemployment.
(b.) If the government reduces the tax on tobacco, more individuals will start smoking.
(c.) The government should lower taxes because tax rates are too high for the average
U.S. family.
(d.) Wealthy senior citizens can afford to buy their own health insurance and therefore
should not be given Medicare coverage.
If firms do not have to account for external costs of production, then they will
________ compared with the efficient values.
A) underproduce and underprice
B) underproduce and overprice
C) overproduce and underprice
D) overproduce and overprice
The government should increase the minimum age for collecting Social Security
benefits. This statement is best described as
A) an example of marginalism.
B) an example of the fallacy of composition.
C) a normative statement.
D) a positive statement.
Figure 9.1
Refer to Figure 9.1. This farmer's shutdown point price is
A) $0.
B) $4.
C) $7.
D) $10.
Figure 3.14
Refer to Figure 3.14. A movement from Point C to Point B on supply curve S2 would be
caused by a(n)
A) decrease in the price of pizza.
B) decrease in the price of pizza dough.
C) increase in the demand for pizza.
D) increase in the price of hamburgers, assuming hamburgers are a substitute for pizza.
Tom's Donuts can invest in a new espresso machine that costs $500 and will yield
expected profits of $350 each year for two years. At higher interest rates, the present
discounted value of profits from the investment
A) increases.
B) decreases.
C) is unchanged.
D) is indeterminate from the given information.
People scalping tickets for a jazz festival will be successful at selling the tickets for a
profit
A) any time the jazz festival is popular.
B) when the price set by the festival organizers is less than the market equilibrium
price.
C) when prices are too high.
D) only when there is excess supply.
Figure 3.17
Refer to Figure 3.17. At a price of $60, there is an excess
A) demand of 150 sunglasses.
B) supply of 300 sunglasses.
C) demand of 300 sunglasses.
D) supply of zero sunglasses.
A perfectly competitive firm will earn positive economic profits in the range of output
for which the firm's price is ________ its minimum average total cost.
A) below
B) above
C) equal to
D) below its marginal cost and
Both Stan and Kyle own potato chip factories. Stan's factory has low fixed costs and
high variable costs. Kyle's factory has high fixed costs and low variable costs.
Currently, each factory is producing 5,000 bags of potato chips at the same total cost.
Complete the following statement with the correct answer. If each produces
A) less, their costs will be equal.
B) more, their costs will be equal.
C) more, the costs of Kyle's factory will exceed those of Stan's factory.
D) less, the costs of Kyle's factory will exceed those of Stan's factory.
Economists usually assume that ________ is a variable input in the ________ run.
A) labor; short
B) capital; short
C) labor; short and long
D) capital; short and long
Firms' ability to invest in capital is limited by households'
A) investment in stock.
B) savings decisions.
C) supply of land.
D) All of the above are correct.
A price- and quantity-fixing agreement is known as
A) game theory.
B) collusion.
C) price concentration.
D) price leadership.
Figure 6.9
Refer to Figure 6.9. The ________ video game rental has a marginal utility of eight.
A) first
B) second
C) third
D) fourth
Figure 2.4
According to Figure 2.4, Point E necessarily represents
A) an impossible production point.
B) technological advancement.
C) overallocation of resources.
D) only motorcycles being produced.
Figure 6.2
Refer to Figure 6.2. Assume Mr. Lingle's budget is AC. At which point does Mr. Lingle
spend exactly his income?
A) A.
B) B.
C) C.
D) All of the above are correct.
The government imposes a tax on imported wine. As a result, fewer individuals
purchase imported wine. This is an example of tax
A) equity.
B) shifting.
C) evasion.
D) incidence.
A decrease in demand for cameras would likely be caused by
A) an increase in the price of a substitute good.
B) an increase in the price of cameras.
C) an increase in the price of a complementary good.
D) a decrease in the price of cameras.
Suppose a 10% increase in the price of steak reduces the consumption of steak by 30%.
Such a price rise will induce households to spend
A) less of their income on steak.
B) more of their income on steak.
C) the same amount on steak as before.
D) more on products that are complementary with steak.
You have been hired by the No Hassle Collection Agency to provide economic advice.
The owner of the agency tells you that No Hassle's only variable input is the number of
collection agents. The hourly wage for collection agents is $40.00. The marginal
revenue product curve for collection agents reaches its maximum at five workers with a
marginal revenue product of $34.00. What advice would you give this firm?
A) Hire five collection agents so as to minimize the amount of money the firm will lose.
B) Shut down immediately, as the firm is not able to cover all of its variable costs.
C) Increase the wage rate paid to collection agents so that their marginal revenue
product will increase.
D) Produce as much as possible so as to maximize the difference between the wage
paid to collection agents and their marginal revenue product.
Costs of production are determined
A) only by the technologies that are available.
B) only by the input prices that are available.
C) by the technologies that are available and by input prices.
D) by the technologies that are available and by the demand for the output.
Studies by ________ during the 1970s indicate that growth in GDP does not guarantee
improvements in development indicators.
A) NAFTA
B) the World Bank
C) the Federal Reserve
D) the International Monetary Fund
The demand for any factor of production in a competitive industry depends on
A) its productivity and upon the value of its output in the marketplace.
B) its productivity and the productivity of all other inputs.
C) the productivity of all the other inputs and how these inputs are valued in the
marketplace.
D) the amount of the factor that is used and the amounts of all the other factors that are
used.
Figure 3.5
Refer to Figure 3.5. If consumer income decreases, the demand for chili peppers shifts
from D0 to D1. This implies that chili peppers are a(n)
A) normal good.
B) inferior good.
C) substitute good.
D) complementary good.
Figure 6.2
Refer to Figure 6.2. Along budget constraint AC, the opportunity cost of one
gardenburger is
A) 1/4 of a beer.
B) 1 beer.
C) 2 beers.
D) changing as Mr. Lingle moves down his budget constraint.
If society will gain by producing less X, then it must be the case that currently
A) PX = MCX.
B) PX > MCX.
C) PX < MCX.
D) either PX > MCX or PX < MCX.
Refer to the information provided in Figure 16.1 below to answer the questions that
follow.
Figure 16.1
Refer to Figure 16.1. What is the total damage imposed as a result of producing the
market (unregulated) level of fertilizer?
A) $250
B) $300
C) $500
D) $600
What is the short-run industry supply curve in a perfectly competitive industry?
Comment on the following statement: "The market demand for public goods is derived
in the same way that the market demand for private goods is derived."
Discuss the factors that determine the ultimate burden of the corporate tax.
Explain the principle of the 'second best."
Suppose that Mighty Mike's Sandwich Shop was started in 1998 and 100 percent of the
$250,000 needed to start up the company was raised by selling shares of stock. In 2000,
the company distributed its entire profit of $15,000 to shareholders. If the market
interest rate is 5 percent, what is the level of economic profit earned by the firm's
stockholders?
Explain how price adjusts to eliminate excess demand.
List the three most common forms of trade barriers.
Suppose that in the short run firms are making economic profit in a monopolistically
competitive industry. Explain what will eventually happen in the long run. In your
answer make sure to discuss demand, price and the relationship between price and
average total cost.
Assume that two countries are the same in every way except that one
allocated more of its resources to the production of capital goods as opposed to
consumer
goods.
What happens to the relative income distribution between the two countries under the
conditions in the previous question? Explain.
Assume that the European Union passes a new trade policy that will only allow trade
with South American countries that pass environmental laws that are the same as those
of member countries in the EU. The argument that is made is that this will provide a
level playing field for the EU in competing with South American nations in
international trade. Critically evaluate this argument.
In what ways can income redistribution be viewed as a public good?
If incomes were equal in an economy can you think of any other problems that might
exist as a result of this equality?
Explain the law of diminishing marginal utility. How does it relate to the shape of
the demand curve?
How do we know when a market is contestable?
What assumptions lead to the conclusion that that the allocation of resources among
firms is efficient.
