Exhibit 8-10 Price and cost data for a firm
In Exhibit 8-10, MR is the same as which column?
a. Q.
b. P.
c. AVC.
d. ATC.
e. MC.
According to Adam Smith, what is the primary source of a nation’s wealth?
a. The amount of gold and silver in the government’s possession.
b. A spirit of cooperation in which people share according to their means.
c. Strong central planning authorities.
d. The people’s ability to produce products and trade in free markets.
In the short run, a firm should shut down its operation if:
a. its losses are less than TFC at the MR = MC point.
b. its losses equal TFC at the MR = MC point.
c. its losses are greater than TFC at the MR = MC point.
d. TR is less than TC.
e. TR exceeds TVC.
The argument that import restrictions save jobs and promote prosperity fails to
recognize that:
a. there are no secondary effects of import restrictions.
b. import restrictions will lower prices in the protected industries.
c. import restrictions cannot create jobs in any industries.
d. U.S. imports provide people in other countries with the dollars power required for the
purchase of U.S. exports.
Which of the following is a normative economic statement?
a. The unemployment rate for the United States is currently 5.4 percent.
b. The inflation rate in the United States is too high.
c. An increase in the price of a good will reduce the amount purchased.
d. Higher profits in an industry will attract more entrepreneurs into the industry.
Which of the following is true for a firm operating under perfect competition,
monopolistic competition, and monopoly?
a. Firms earn positive economic profits in the long run.
b. Firms earn zero economic profits in the long run.
c. Profits are maximized when marginal cost equals marginal revenue.
d. Price equals marginal cost.
Exhibit 11-2 Labor and output data
In Exhibit 11-2, if product price is fixed at $5, the MRP of the third worker is equal to:
a. $35.
b. $125.
c. $25.
d. $175.
e. $100.
Exhibit 3-15 Supply and demand curves for good X
In Exhibit 3-15, at a price of $.50 the market for good X will experience a:
a. shortage of 100 units. c. shortage of 300 units.
b. surplus of 100 units. d. surplus of 200 units.
The industry that most closely approximates the conditions of the oligopoly model is:
a. Restaurant. c. Home construction.
b. Retail clothing. d. Airlines.
Under the Clayton Act, horizontal mergers by stock acquisition were:
a. not considered.
b. illegal if they could be show to lessen competition.
c. illegal under any circumstances.
d. legal if they could be shown to lessen competition.
The law of demand indicates that:
a. every physical good has a use.
b. when people want a good badly enough, they will find a way to pay for it.
c. the desire for a good is unrelated to its price.
d. the quantity of a good that people will buy is inversely related to the price of the
good.
When Pepsi becomes more expensive relative to other beverages, people will purchase
less Pepsi. This observation is known as the:
a. diamond-water paradox.
b. law of diminishing marginal utility.
c. substitution effect.
d. income effect.
If demand is inelastic, an increase in the price of a good will cause total revenue to:
a. fall.
b. remain constant since the decrease in quantity sold is exactly offset by the price
increase.
c. rise.
d. rise if it is a normal good and fall if it is an inferior good.
The following chart indicates the reductions in total losses due to theft if a jewelry store
hires additional security guards.
If the security guards can be hired for $45 per day, how many guards should the shop
hire?
a. 2.
b. 3.
c. 4.
d. 5.
If X is a normal good, a rise in consumer income will shift the:
a. demand curve for X to the right. c. supply curve for X to the right.
b. demand curve for X to the left. d. supply curve for X to the left.
Since the 1980s, Wal-Mart stores have appeared in almost every community in
America. Wal-Mart buys their goods in large quantities and therefore at cheaper prices.
Wal-Mart also locates its stores where land prices are low, usually outside of the
community business district. Many customers shop at Wal-Mart because of low prices
and free parking. Local retailers, like the neighborhood drug store, often go out of
business because they lose customers. This story demonstrates that:
a. consumers are boycotting local retailers.
b. Wal-Mart engages in illegal acts of monopolization.
c. there are diseconomies of scale in retail sales.
d. there are economies of scale in retail sales.
e. Wal-Mart is managed by ruthless business people.
Exhibit 8-12 Marginal revenue and cost per unit curves
As shown in Exhibit 8-12, if the price is OD, a perfectly competitive firm maximizes
profit at which point on its marginal cost curve?
a. E.
b. F.
c. I.
d. Between E and I.
Which of the following statements is not true?
a. If marginal social cost and marginal private cost are the same, any externality that
exists will be positive.
b. If marginal externality costs are not zero, externalities exist.
c. An expansion of property rights to include air quality and scenic beauty would bring
some private markets close to a socially optimal equilibrium.
d. The existence of pollution as the byproduct of a production or exchange process
indicates a market failure.
e. When municipal water supplies have heavy concentration of agricultural chemicals, it
is probable that agricultural output from the area is produced in quantities greater than
the socially optimal level.
If Allison’s marginal utility of her 100th dollar of income is greater than Brad’s marginal
utility of his 10th dollar, then we can conclude:
a. money means more to Allison.
b. money means more to Brad.
c. Brad is richer than Allison.
d. Allison is richer than Brad.
e. nothing, since we can’t make interpersonal utility comparisons.
Suppose all of the major computer manufacturers announced that beginning next month
there would be major price reductions on their computers. This would cause the current
demand for computers to:
a. increase. c. remain unchanged.
b. decrease. d. increase and then decrease.
If X and Y are complementary goods, the demand curve for X will shift to the right
when the price of Y increases.
When the government imposes a tax, sellers raise their price by the full amount of the
tax.
According to the text, Ireland and Israel are classified as less developed countries
(LDCs).
A surplus in a market exists when there is an excess quantity demanded.
Deadweight loss results from a misallocation of resources.