A line that slopes downward from left to right has a positive slope.
a. True
b. False
A cartel is
a. a group of oligopolists who try to behave like a single monopolist and split the
benefits among themselves.
b. a government-approved organization for the exchange of technical information
among firms.
c. a form of competition among oligopolists.
d. a regulated industry that is officially permitted to set the price of its product above
long-run average total cost.
Technological advances shift the supply curve rightward.
a. True
b. False
In the long run, a monopolistically competitive firm’s demand curve must be tangent to
its average cost curve.
a. True
b. False
Figure 10-6
In Figure 10-6, the price at long-run equilibrium is
a. $5.
b. $10.
c. $20.
d. $35.
If the demand for gasoline becomes more elastic over time,
a. the demand curve will shift out.
b. the demand curve will become flatter.
c. other things being equal, the equilibrium price of gasoline must fall.
d. other things being equal, the equilibrium quantity of gasoline must fall.
Use the law of diminishing marginal utility to explain why Domino’s and Pizza Hut
allow the purchase of a second pizza for only $4 when one pays full price (around $10)
for the first pizza. Why not simply charge $7 a pizza instead?
Profits will be maximized when the slope of the total revenue curve and the slope of the
total cost curve are equal.
a. True
b. False
If the United States is to reduce poverty by using a negative income tax, the guaranteed
income should be
a. two times the tax rate.
b. close to the poverty line.
c. close to the median income of all families.
d. above the poverty line.
The payroll tax system is a proportional tax for all income earners.
a. True
b. False
If all countries produce the goods for which they have comparative advantages, all
countries benefit with the increased production of goods with no additional resources
being used.
a. True
b. False
The price elasticity of new automobile purchases is about 1.2. This implies that an
increase of $1,000 on a $10,000 automobile will
a. reduce the number of autos sold by approximately 1.2 percent.
b. increase the consumer expenditures on autos by approximately 1.2 percent.
c. reduce the number of autos sold by approximately 12 percent.
d. increase consumer expenditures on autos by approximately 12 percent.
Economists would describe cartels as
a. the opposite of ignoring interdependence.
b. a collusive arrangement.
c. an undesirable form of market organization that may charge a monopoly price.
d. All of the above are correct.
If the production of a good generates a detrimental externality, then at that level of
production of the good under perfect competition,
a. MU = MSC.
b. P < MPC.
c. MPC < MSC.
d. MPC > MSC.
Edgar Browning and William Johnson, in a paper published in the Journal of Political
Economy (1984), presented evidence that a one-dollar transfer to the bottom 40 percent
of income distribution costs the top 60 percent nine dollars. If correct, this finding
proves
a. the tax system is generating significant excess burdens.
b. these transfers are not worth the cost.
c. loopholes have to be closed.
d. the burden of the tax system is too great.
Price leadership works only if there is a single, dominant firm in the oligopoly.
a. True
b. False
The force that leads to zero economic profits for monopolistically competitive firms in
the long run is
a. excess capacity.
b. price wars among firms.
c. entry by new firms.
d. excessive advertising.
The total market value of capital assets in the United States is about $30 trillion dollars.
a. True
b. False
The head tax is regressive.
a. True
b. False
The quantity of Blu-Ray players purchased declined in spite of a decline in price. This
implies that the
a. supply curve for Blu-Ray players shifted to the left.
b. demand curve for Blu-Ray players shifted to the right.
c. demand curve for Blu-Ray players shifted to the left.
d. supply curve for Blu-Ray players shifted to the right.
If the quantity of one good that must be forgone increases as successive units of another
good are produced, then there is said to be increasing opportunity cost between the two
goods.
a. True
b. False
Inheritance taxes tend to increase income inequality in the long run.
a. True
b. False
Basic supply and demand analysis can be used to explain how externalities lead to
environmental problems.
a. True
b. False
Figure 22-7
In Figure 22-7, AB represents the production possibilities of Pestoland and CD that of
Pastaland. In this graph, Pestoland has a comparative advantage in
a. pasta because OA/OB < OC/OD.
b. pesto because OA/OB < OC/OD.
c. pasta because OA/OB OC/OD.
d. pesto because OA/OB OC/OD.
A student was heard to remark, “Even though I am certain to fail this course, I cannot
withdraw from it since it is too late to get back my tuition.” Use one or more “Ideas for
Beyond the Final Exam” to analyze this reasoning.
The firm should continue to operate in the short run if TR exceeds short-run variable
cost (TVC). It should plan to close in the long run if TR is less than TC.
The first rule requires no explanation. The second rule relies on the distinction between
fixed and variable costs. The firm can avoid variable costs in the short run by shutting
down. However, it is unable to avoid fixed costs by shutting down. If a firm shuts
down, its losses will equal the amount of its fixed costs. If revenue exceeds total
variable cost (or, equivalently, if price exceeds the minimum of average variable cost),
the firm should operate, pay all variable costs and some portion of fixed costs, to
minimize losses.
Michael Jordan averaged 35 points per game over a 100-game season. During the
playoff round of 10 games, he averaged 50 points, and in the five-game championship
series, he led the Chicago Bulls to victory, averaging 40 points. For the entire season,
how many points did Jordan score, what was his average, and did the championship
series pull his previous average up or down?
Why is regulation necessary to achieve “universal service”?
The phone network says it loses money on local calls, because the $20 average monthly
bill does not cover its average cost of $30. It estimates that $18 of costs are directly
related to local service, with $12 the share from overall expenses (overhead). Why
would the phone network be willing to operate if it is losing money?
What is division of labor? How does it raise efficiency and productivity?
How does the idea of a leaky bucket relate to the study of income distribution?
Plot the demand for caviar given the following information on quantity consumed and
total utility; then explain why caviar sells for such a high price.
Distinguish between demand and quantity demanded. Do the same for supply and
quantity supplied.