If the minimum efficient scale in toaster production is 500,000 units per year, the
average cost of producing 300,000 toasters is greater than the average cost of producing
500,000.
a. True
b. False
When is a balance of payments account out of balance?
a. only when exports are greater than imports
b. only when imports are greater than exports
c. when exports are either greater or less than imports
d. only when exports are greater or less than imports over a sustained period
e. never
Exhibit 7-16
Which combination of capital and labor illustrated in Exhibit 7-16 will maximize the
producers revenue?
a. a
b. b
c. c
d. e
e. cannot tell from information given
If the supply curve slopes upward and a $3 per unit tax on suppliers raises the
profit-maximizing price by $3, demand must be perfectly inelastic.
a. True
b. False
Marginal cost indicates how much total cost increases if one more unit is produced or
how much total cost drops if production declines by one unit.
a. True
b. False
As a scientist, an economist’s main professional objective is to
a. become wealthy
b. control the government’s decision-making processes
c. understand how the economy works
d. discover which stock prices will decrease
e. understand the psychology of participants in markets
An important difference between a perfectly competitive firm and a monopolist is that
a. the perfectly competitive firm tends to be larger
b. only the monopolist attempts to maximize profit
c. only the perfectly competitive firm maximizes profit
d. the perfectly competitive firm faces a horizontal demand curve and the monopolist
faces a downward-sloping demand curve
e. only the monopolist maximizes profit at the quantity where marginal cost equals
marginal revenue
Exhibit 11-5
In Exhibit 11-5, which unit of the resource is earning the most economic rent?
a. none earns economic rent
b. the first
c. the sixtieth
d. the hundredth
e. they are all earning the same positive economic rent
Exhibit 2-11
Refer to exhibit 2-11. The United States has a comparative advantage in the production
of T-shirts.
a. True
b. False
Exhibit 8-19 A Single Firm in a Perfectly Competitive Market
Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive
firm. If P3 represents the equilibrium market price. What is the profit-maximizing
quantity for the firm?
a. Q1bushels
b. Q2bushels
c. Q3bushels
d. Q4bushels
e. Q5bushels
The index that the U.S. government currently uses to determine whether a merger
should be allowed is the
a. Herfindahl index
b. Schumpeter index
c. Dow Jones average index
d. consumer price index
e. four-firm concentration ratio
If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the
quantity demanded from 100 to 80 units, then the value of price elasticity of demand is
a. -1/3
b. -2 1/3
c. -1/4
d. -3
e. -2/3
Exhibit 9-14
At the profit-maximizing (or loss-minimizing) level of production, the monopoly in
Exhibit 9-14 will have a
a. profit per unit of output of $2
b. loss per unit of output of $2
c. loss per unit of output of $5
d. profit per unit of output of $5
e. loss per unit of output of $4
Which of the following is not true of a pure monopoly?
a. Demand is negatively sloped
b. Marginal revenue is less than price therefore the firm should consider raising its price
until marginal revenue equals demand
c. Marginal revenue is less than average revenue therefore the firm should consider
adjusting its quantity until marginal revenue equals average revenue
d. It is a price taker
e. Its position is protected by significant barriers to entry
If two accountants have had the same education, amount of experience, and work at the
same type of job for the same profit-maximizing firm, which charges its clients a
uniform hourly fee,
a. they should earn the same amount of money
b. the one whose job is riskier should be paid more
c. the one whose job is riskier should be paid less
d. the one who has a higher marginal product (due to ability) should be paid more
e. the one who has a higher marginal product (due to ability) should be paid less
If the country of Zorg has a birth rate of greater than 2.2 births per woman, it is likely
that Zorg is an industrial market country.
a. True
b. False
Legislation that provides a subsidies for tobacco growers is an example of
a. public-interest legislation
b. competing-interest legislation
c. a positive-sum game
d. special-interest legislation
e. concentrated-costs legislation
Exhibit 17-2
In Exhibit 17-2, the socially efficient price and level of output are
a. $6 and 50 units, respectively
b. $12 and 50 units, respectively
c. $12 and 40 units, respectively
d. $6 and 40 units, respectively
e. not indicated
An isoquant is negatively sloped because
a. labor is productive and capital is not
b. both labor and capital are costly
c. labor and capital can replace each other in production
d. labor and capital can replace each other in expenditure
e. the ratio of marginal productivities rises, then falls
Exhibit 17-6
Exhibit 17-6 illustrates the presence of
a. positive externalities
b. positive and negative externalities
c. negative externalities
d. the Coase theorem
e. a private market with a socially efficient equilibrium
Which of the following is a social insurance program?
a. Medicaid
b. food stamps
c. unemployment compensation
d. Temporary Assistance for Needy Families
e. general assistance
Exhibit 7-21
If the isocost line in Exhibit 7-21 is AB, the firm’s optimal combination of inputs is
shown at point
a. g
b. j
c. i
d. l
e. h
The demand curve a monopolist faces
a. is more elastic than a perfectly competitive firm’s demand curve
b. is the market demand curve
c. is as elastic as a perfectly competitive firm’s demand curve
d. is not affected by the prices of complements
e. will not shift in response to a change in consumer tastes
Economic theory
a. expresses normative values
b. invents imaginative and interesting stories
c. predicts the behavior of a specific economic decision maker after an economic
change
d. predicts the average behavior of a group of similar economic decision makers after
an economic change
e. uses only perfect and complete information
Which of the following creates a positive externality?
a. a paper mill polluting a river
b. a stock market crash
c. a neighbor that beautifies her lawn
d. taxes and subsidies
e. the greenhouse effect
Exhibit 4-12
Refer to Exhibit 4-12. A shift from supply curve S to supply curve S” could be caused
by a(n)
a. decrease in consumer income
b. increase in the current price of the product
c. patent application that restricts the use of a particular production technology
d. several competing producers going out of business
e. supplier expecting higher product prices in the future
Economists classify all of the following as capital, except one. Which one is not
capital?
a. a $20 bill in a firm’s petty cash drawer
b. the building where our economics class meets
c. a plumber’s wrench
d. a railroad car
e. a factory
What part of federal government spending has grown the most slowly in recent
decades?
a. national defense
b. welfare
c. interest on the national debt
d. social security and medicare
e. all other forms of federal government spending
John moved his office from a building he was renting downtown to the carriage house
he owns in back of his house. How will his profit change?
a. Implicit costs fall.
b. Explicit costs remain unchanged while implicit costs rise.
c. Economic profit must fall.
d. Explicit costs rise.
e. Accounting profit will rise.
Exhibit 15-5
The natural monopoly depicted in exhibit 15-5, if unregulated would produce how
much output?
a. 2 units
b. 3 units
c. 4 units
d. 5 units
e. 6 units
Negative marginal utility means that
a. total utility is also negative
b. marginal utility increases as additional units are consumed
c. the price of the product increases as additional units are consumed
d. the total revenue spent on the product decreases as more of the product is purchased
e. total utility decreases as additional units are consumed
What is the relationship between marginal cost and marginal product?
a. The two are not related.
b. When marginal product increases, marginal cost increases.
c. When marginal product increases, marginal cost falls.
d. When marginal product is negative, marginal costs are negative.
e. When diminishing marginal returns set in, marginal costs fall.
Because of discrimination, which of the following have systematically earned less than
others of equal ability?
a. only African-Americans
b. only Hispanics
c. only African-Americans and Hispanics
d. African-Americans, Hispanics, and women
e. only Hispanics and women
Exhibit 19-1
Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda
and Beta for fish and coconuts. If the terms of trade are 1 fish per coconut, then
Lambda and Beta would be able to benefit from specialization and trade.
a. True
b. False