The WTO and GATT promote trade by:
A) reducing tariffs.
B) directing trade.
C) setting the prices of goods sold internationally.
D) all of the above
Figure 12.1 shows a successful price-fixing arrangement (cartel) between two identical
firms. When the two firms act like one and charge the same price, each firm will earn
an economic profit of ________.
A) $1,250
B) $1,000
C) $500
D) $0
The Clayton Act:
A) strengthened the Sherman Act.
B) was developed to encourage the creation of cartels.
C) replaced the Sherman Act.
D) made cooperative agreements enforceable.
________ is a monopoly that exists in an industry where the large economies of scale
acts as its barrier to entry.
A) A natural monopoly
B) A monopolistic competitor
C) A regulated monopoly
D) A price discriminator
Refer to Table 8.2, which gives a firm’s production function. Assume that all non-labor
inputs are fixed. The marginal product of the fifth worker is:
Table 8.2
A) 0 units.
B) 10 units.
C) 25 units.
D) 30 units.
Figure 18.4
Refer to Figure 18.4. With free trade, what is the equilibrium quantity of artichokes in
Duckland?
A) 85
B) 75
C) 65
D) 30
Suppose that the price of a bottle of soda is $2. Vonda’s marginal cost of production is
$1.25 for the first bottle, Galiela’s marginal cost of production is $1.50 for the second
bottle, Gretchen’s marginal cost of production is $1.75 for the third bottle, and Matt’s
marginal cost of production is $2 for the fourth bottle. Which producer gets no producer
surplus?
A) Vonda
B) Galiela
C) Gretchen
D) Matt
An increase in demand will cause a relatively small increase in price when:
A) the increase in demand is large.
B) demand is highly inelastic.
C) supply is highly elastic.
D) all of the above
In the short run, a firm considers its fixed cost as a(n):
A) sunk cost.
B) variable cost.
C) implicit cost.
D) marginal cost.
Suppose that a labor market is initially in equilibrium. If the minimum wage is set
above the initial equilibrium wage rate:
A) all workers in the labor market will be better off, receiving a higher wage per hour.
B) the labor supply curve will shift to the right.
C) the quantity demanded of labor will decrease along the given labor demand curve.
D) all of the above
When the price of charcoal grills increases, total revenue increases for charcoal grill
retailers. From this information, we can conclude that:
A) the law of demand does not hold.
B) the demand for charcoal grills is inelastic.
C) the supply of charcoal grills is inelastic.
D) corporations are greedy.
Suppose that Harold buys collision insurance for his car and then drives it recklessly.
This is an example of:
A) a positive spillover.
B) moral hazard.
C) adverse selection.
D) irrational behavior.
The official poverty line in the U.S. is currently set at ________ times the cost of a
minimum food budget.
A) two
B) three
C) four
D) five
If the price elasticity of supply is 3, supply is:
A) unaffected by price changes.
B) inelastic.
C) unitary elastic.
D) elastic.
The result of adverse selection is that:
A) higher-quality producers drive lower-quality producers out of the market.
B) lower-quality producers drive higher-quality producers out of the market.
C) consumers will be able to purchase only high-quality products.
D) higher-quality producers receive a higher price than they would if adverse selection
was not present.
Refer to Figure 18.2. After trade and specialization begin, the maximum amount of
fishing poles that Macadamia can consume is:
Figure 18.2
A) 40.
B) 100.
C) 120.
D) 160.
Suppose that there are five firms in a market, each controlling 20% of the market. The
HHI would equal:
A) 10.
B) 100.
C) 1,000.
D) 2,000.
The presence of a fixed input means that the marginal product of labor eventually
declines. This concept is known as:
A) decreasing marginal cost.
B) diminishing returns.
C) derived demand.
D) downward-sloping output curve.
What are import licenses?
A) These are rights, issued by the government, to import goods.
B) These are rights, issued by a foreign government, to import goods.
C) These are rights, issued by the government, to buy foreign exchange used to import
goods.
D) These are rights, issued by the government, to produce goods similar to the imported
goods.
If, while producing goods and services, a factory is producing pollution and not
incurring the cost of this pollution, then a(n) ________ exists.
A) government failure
B) market failure
C) acceptable outcome
D) none of the above
A carbon tax could reduce greenhouse emissions by:
A) raising the price of gasoline and reducing driving.
B) raising the price reducing of electricity, the quantity of electricity demanded and
reducing the fossil fuels burned.
C) cause electricity producers to switch to lower carbon fuels.
D) all of the above.
Recall the Application about the salaries paid in Major League Baseball to answer
the following question(s). Some Major League Baseball players are free agents,
meaning they are free to negotiate a contract with any team. Other players are
journeymen and apprentices, who are restricted to a single team.
Recall the Application. On average, free agents in Major League Baseball tend to be
paid a salary ________ their marginal revenue product.
A) significantly higher than
B) significantly lower than
C) close to
D) unrelated to
A U.S. boycott against Mexican tuna caught in nets was:
A) upheld by the WTO on the grounds that the use of nets to catch tuna also kills
dolphins.
B) upheld by the WTO on the grounds that nations can impose any environmental
standards on other nations.
C) not upheld by the WTO on the grounds that U.S. ships could still use nets to catch
tuna.
D) not upheld by the WTO on the grounds that killing dolphins in tuna nets does not
harm the United States directly.
The Latin phrase ceteris paribus means that when a relationship between two variables
is being studied:
A) both are treated as unpredictable.
B) neither of those two variables is allowed to change.
C) all other variables are held fixed.
D) we recognize that some factors are unknown.
Slope is calculated as the:
A) change in the vertical variable divided by the change in the horizontal variable.
B) change in the horizontal variable divided by the change in the vertical variable.
C) the vertical axis divided by the horizontal axis.
D) change in the vertical variable.
The perfectly competitive firm faces a demand curve that is ________ and ________:
A) perfectly inelastic; vertical
B) perfectly elastic; horizontal
C) unitary elastic; slopping downward
D) the same as the market demand for the product; vertical
Markets exist:
A) as an arrangement that allows buyers and sellers to exchange things.
B) because people are not self-sufficient.
C) because people specialize in the production of one or two products.
D) all of the above
Figure 12.1 shows a successful price-fixing arrangement (cartel) between two identical
firms. If the cartel collapses and the two firms compete against each other, each firm’s
profit will be ________ and the quantity will be ________.
A) smaller; smaller
B) smaller; greater
C) greater; smaller
D) greater; greater
Consider the monopoly depicted in Figure 13.3. Relative to the cost of producing the
quantity the monopolist would choose under an average-cost pricing policy, the cost of
producing Q4 units is:
A) less.
B) the same.
C) more.
D) twice as much.
The importers of a good may prefer a quota over a tariff because:
A) a quota generates additional profits for importers.
B) a tariff, but not a quota, generates additional profits for importers, not the
government.
C) the government gives subsidies to those who import from other countries.
D) a quota may have more loopholes in its implementation than a tariff.
Suppose the nation of Alphonia was charged with dumping electric lawnmowers in the
nation of Omegalon. The result of Omegalon imposing anti-dumping tariffs on electric
lawnmowers manufactured in Alphonia would most likely be:
A) an increased market share for Alphonian-manufactured electric lawnmowers in
Omegalon.
B) higher selling prices on electric lawnmowers in Omegalon.
C) lower selling prices on electric lawnmowers in Alphonia.
D) increased exports of electric lawnmowers from Alphonia.
An unemployed individual decides to spend the day fishing. The opportunity cost of
fishing is:
A) the cost of bait and any other monetary expenses.
B) zero, because the person doesn’t have a job.
C) the cost of bait, any other monetary expenses, and the value of the individual’s wages
while he was working.
D) the cost of bait, any other monetary expenses, and the value of the best alternative
use of the individual’s time.
In the short run, ________ factors of production are fixed, while in the long run,
________ of them are.
A) some; none
B) all; none
C) no; at least some
D) all; at least some
The slope of a straight line is:
A) constant.
B) increasing.
C) increasing if the line is upward sloping.
D) increasing if the line is downward sloping.
If the number of highway deaths among young people is roughly proportional to their
beer consumption and young peoples’ elasticity of demand for beer is 1.5, then a tax
increase that increases the price of beer by 20% would roughly reduced highway deaths
of young people by:
A) 1.5%.
B) 13.33%.
C) 20%.
D) 30%.