The term “trust” in antitrust refers to a board of trustees that has collusive control over
different companies.
Costs that change as output changes are called incremental costs.
The most important factor contributing to wage differences in the labor market is
differences in the level of education and training among workers.
Competition has driven the economic profits in the video rental business to zero. Surya
Bacha, who owns a video rental business, would be better off leaving the industry for
another alternative.
Once a country has a comparative advantage in producing a product, it cannot lose that
advantage.
Figure 21-4
Which of the following is consistent with the graph depicted?
A) an increase in household income
B) an increase in transfer payments to households
C) an increase in the proportion of income after net taxes used for consumption
D) an increase in tax revenues collected by the government
Legalizing all forms of illegal activities
A) reduces GDP and the size of the underground economy.
B) reduces GDP and increases the size of the underground economy.
C) increases GDP and reduces the size of the underground economy.
D) increases GDP and increases the size of the underground economy.
Which of the following is not a cost posed by inflation?
A) Inflation reduces the affordability of goods and services to the average consumer.
B) The money that consumers and firms hold loses its purchasing power.
C) Firms must pay for changing prices on products and printing new catalogs.
D) Banks can lose if they under predict inflation and charge an interest rate that does
not completely compensate for inflation.
Suppose a price floor on sparkling wine is proposed by the Health Minister of the
country of Vinyardia. What will be the likely effect on the market for sparkling wine in
Vinyardia?
A) Consumer surplus will increase.
B) Producer surplus will increase.
C) Deadweight loss will increase.
D) Market efficiency will increase.
Figure 9-4 Figure 9-4 shows the U.S.
demand and supply for leather footwear.
Suppose the government allows imports of leather footwear into the United States. The
market price falls to $24. What area represents domestic producer surplus?
A) T + U
B) V
C) V + W + X + Y
D) W + X + Y
“The price of digital cameras fell because of improvements in production technology.
As a result, the demand for non-digital cameras decreased. This caused the price of
non-digital cameras to fall; as the price of non-digital cameras fell, the demand for
non-digital cameras decreased even further.” Evaluate this statement.
A) The statement is false because the demand for non-digital cameras would increase as
the price of digital cameras fell.
B) The statement is false. A decrease in the price of digital cameras would decrease the
demand for non-digital cameras, but a decrease in the price of non-digital cameras
would not cause the demand for non-digital cameras to decrease.
C) The statement is false because it confuses the law of demand with the law of supply.
D) The statement is false because digital camera producers would not reduce their
prices as a result of improvements in technology; doing so would reduce their profits.
Table 4-7
The equations above describe the demand and supply for Pauline’s Pickled
Pomegranates. What are the equilibrium price and quantity (in thousands) for Pauline’s
Pickled Pomegranates?
A) $60 and 20 thousand
B) $15 and 45 thousand
C) $30 and 15 thousand
D) $20 and 10 thousand
The division of labor and specialization explain
A) why, when the marginal product of labor increases, so does the average product of
labor.
B) why the average product of labor falls when firms use more capital or change the
layout of their businesses.
C) why the marginal product of labor rises as a firm hires its first units of labor.
D) why firms may find it profitable to use more workers when the marginal product of
labor is negative.
If a firm is a natural monopoly, competition from other firms cannot be counted on to
force price down to the level where the company earns zero economic profit. How are
prices usually set in natural monopoly markets in the United States?
A) Each natural monopoly is made a public franchise. The public franchise is then
required to set its price equal to its marginal cost.
B) Natural monopolies are privately owned, but prices proposed by the firms must be
approved by the Antitrust Division of the Department of Justice.
C) Natural monopolies are privately owned and allowed to set their own prices.
Government regulation of the firms would result in greater deadweight losses.
D) Local or state regulatory commissions usually set prices for natural monopolies.
Which of the following would be most likely to induce Congress and the president to
conduct expansionary fiscal policy? A significant
A) decrease in investment spending.
B) decrease in oil prices.
C) increase in consumption spending.
D) increase in net exports.
Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his
household income was $30,000. This year, his household income fell to $20,000 and
Sefton purchased 80 pounds of potatoes. All else constant, Sefton’s income elasticity of
demand for potatoes is
A) negative, so Sefton considers potatoes to be an inferior good.
B) positive, so Sefton considers potatoes to be an inferior good.
C) positive, so Sefton considers potatoes to be a normal good and a necessity.
D) negative, so Sefton considers potatoes to be a normal good.
If a perfectly competitive firm’s price is above its average total cost, the firm
A) is earning a profit.
B) should shut down.
C) is incurring a loss.
D) is breaking even.
Table 27-3
Table 20-19
Looking at the table above, what is the approximate rate of growth of real average
hourly earnings from 2011 to 2012?
A) 15%
B) 4.4%
C) -1.5%
D) -4.8%
A decrease in the tax rate will ________ the disposable income of households and
________ the size of the multiplier effect.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
E) increase; not change
If a typical firm in a perfectly competitive industry is incurring losses, then
A) all firms will continue to lose money.
B) some firms will exit in the long run, causing market supply to decrease and market
price to rise increasing profits for the remaining firms.
C) some firms will exit in the long run, causing market supply to decrease and market
price to fall increasing losses for the remaining firms.
D) some firms will enter in the long run, causing market supply to increase and market
price to rise increasing profit for all firms.
Explain why the tax multiplier is different from the government purchases multiplier, in
both sign and relative magnitude.
Why is the aggregate demand curve downward sloping while the aggregate expenditure
line is upward sloping?
What does it mean to say that workers and firms have rational expectations?
What are some reasons why the unemployment rate is typically lower in the United
States as compared to Canada and some Western European countries?
You review a salesman’s income over a 5-year period. You note it fluctuates
tremendously from year to year, yet his consumption of goods and services remains
consistently at the same level, year after year. Does this mean that income is not a
determinant of consumption, or could something else explain his behavior?
What is a long-run supply curve? What does a long-run supply curve look like on a
perfectly competitive market graph?
Why do most economists believe that it is important for a country’s central bank to be
independent of the rest of the country’s central government?
When will an increase in aggregate demand not result in lower unemployment rates in
the short run?