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One possible solution to improve performance of regulated firms is which of the
following?
a. Allow the firm to set its own rate of return.
b. Allow higher rates of return to cover higher cost of better performance.
c. Allow a higher rate of return for better performance.
d. Set lower prices when efficiency improves.
The result that perfectly competitive firms produce at the lowest per-unit cost is derived
from the assumptions of
a. homogeneous products.
b. few sellers.
c. firms facing horizontal demand curves.
d. free entry and exit.
If income rises, most consumers will increase the quantity demanded of an inferior
good.
a. True
b. False
Determining the optimal choice of input combinations generally does not involve
a. substitution of one input for another.
b. fixing the level of technology in the long run.
c. minimizing cost, given the prices of inputs.
d. assessing the productivity of various inputs.
The United States economy is
a. the third largest in the world.
b. larger than all other national economies combined.
c. second largest in the world, behind Japan.
d. largest in the world.
If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.
a. True
b. False
The allocation of resources is efficient under an idealized free market system.
a. True
b. False
A country has a comparative advantage over another in the production of gadgets if it
can produce
a. more gadgets than can the other country.
b. more gadgets than can any other country.
c. gadgets more efficiently than it can produce any other good.
d. gadgets at lower opportunity cost than can the other country.
Dwindling resources encourage the development of substitute products.
a. True
b. False
Two advisors to the president have given their policy recommendations, and they are in
disagreement. Why do these economists disagree?
a. because they do not have all relevant information about the problem
b. because they disagree on the nature of some cause-effect relationship
c. because they have different values and opinions
d. All of the above are reasons for disagreements among economists.
Actual experiments show that negative income taxes destroy work incentives.
a. True
b. False
Figure 4-16
In Figure 4-16, an increase in the number of producers will shift supply from
a. S1 to S2.
b. S2 to S1.
c. S3 to S2.
d. S3 to S1.
Pollution taxes are more efficient in cleaning up the environment than direct controls.
What role is there for direct controls?
a. They are useful standby mechanisms.
b. They are useful if it is decided to prohibit the substance altogether.
c. They are useful where dependable metering devices are not available or prohibitively
costly to install.
d. All of the above are true.
A market structure in which only one firm has survived because of its economies of
scale is called a
a. natural monopoly.
b. planned monopoly.
c. structural monopoly.
d. free monopoly.
The long-run industry supply curve in perfect competition is derived from the
a. short-run industry supply curve which shifts as new firms enter the industry.
b. short-run industry supply curve which shifts as old firms exit the industry.
c. freedom of firms from sunk costs so that new cost curves become long-run curves.
d. All of the above reasons.
