The basic principle that explains the demand for a factor of production is the
a. principle of marginal productivity.
b. Hotelling principle.
c. principle of opportunity cost.
d. Ramsey pricing principle.
The cost of processors and memory has decreased dramatically in the past twenty-five
years. As a result, we have seen
a. an increase in demand.
b. an increase in supply.
c. a decrease in demand.
d. a decrease in supply.
A company’s annual payment to stockholders is called the
a. dividend.
b. kickback.
c. plowback.
d. retained earnings.
The least scrutiny of management’s operations occurs when ____ is the method used in
corporate financing.
a. stock issue
b. bond issue
c. plowback
d. watering
If supply increases, the equilibrium price will rise and the equilibrium quantity will fall.
a. True
b. False
Suppose the numbers in parentheses represent two points on a line: (59 billion quarts;
$4) and (78 billion quarts; $6). The line is most likely a
a. production possibilities frontier for milk.
b. supply curve for milk.
c. demand curve for milk.
d. ray through the origin.
e. time series line.
A perfectly competitive industry in long-run equilibrium is described as efficient
because firms
a. produce at the low point on their average cost curve.
b. produce where marginal cost yields a profit.
c. earn no more than the cost of capital.
d. are not profitable.
The demand curve for labor slopes downward because
a. few workers work at low wages.
b. capital has been substituted for labor in most industries.
c. of the diminishing marginal product of labor.
d. All of the above are true.
Efficiency in the choice of outputs requires that marginal cost be equal to marginal
revenue and nothing else.
a. True
b. False
The production possibilities frontier illustrates
a. the fundamental fact of scarcity.
b. the opportunity cost of acquiring more of one good.
c. maximum output utilizing all resources efficiently.
d. All of the above are correct.
In the long run, foreign labor remains cheap when and if
a. it becomes highly efficient and competes successfully internationally.
b. countries erect barriers to trade between poor countries.
c. productivity increases more rapidly in poor countries than in rich countries.
d. it remains inefficient compared to other countries’ labor.
A firm can choose a quantity of output, and the price is then determined by
a. the government.
b. the supply schedule.
c. consumers’ demand.
d. the average cost.
The factor that most often leads to under pricing and overuse of an economic resource
is human greed.
a. True
b. False
The quantity of newspapers sold will decline if
a. newsprint becomes more expensive.
b. the printers’ union makes wage concessions.
c. prices are reduced.
d. magazine prices rise.
When unions and management fail to reach agreement and the public interest is
compromised, the government may require the union and management to undertake
mediation.
a. True
b. False
The negative slope of a production possibilities frontier is a graphic representation of
opportunity cost.
a. True
b. False
If the production of a good generates a detrimental externality, then at that level of
production of the good under perfect competition,
a. MSC > P.
b. MPC > MSC.
c. P > MU.
d. MPC > P.
An oligopoly can be characterized by production of either identical goods or different
goods.
a. True
b. False
Most economists agree that exclusive reliance on direct controls
a. is a sound approach.
b. has worked well for us in the past.
c. is cheaper than any other enforcement mechanism.
d. is a mistake.
A nation can gain from imposing a tariff on imports if it forces exporting countries
a. to raise their prices to pay the tariff.
b. to lower their prices to avoid stocks of unsold goods.
c. to produce at diseconomies of scale.
d. to accept some imports from the tariff-imposing nation.
The short-run supply curve for the perfectly competitive firm is that part of the marginal
cost curve that lies above the average fixed cost curve.
a. True
b. False
Almost 85% of American firms have less than
a. 20 employees.
b. 100 employees.
c. 500 employees.
d. 1,000 employees.
As a price change persists over a long period of time, we should expect the demand
elasticity to fall.
a. True
b. False
Government ownership of property and resources in the United States is
a. about as common as it is in European countries.
b. widespread; the United States is a leader in the amount of government ownership of
resources.
c. relatively rare; the United States is mostly privatized.
d. rare, but has been increasing rapidly as the United States catches up to other
countries.
Without government intervention, public goods would
a. be much less expensive.
b. not be provided.
c. be produced in much larger quantity.
d. be priced within the income ability of all individuals to purchase them.