The absence of value judgments is the essence of
a. normative economics.
b. positive economics.
c. microeconomics.
d. macroeconomics.
Five months ago Wilson opened up a health club. Which of the following is an implicit
cost related to the health club?
a. Wilson paid $120 for an outside laundry service to clean the towels used at the club.
b. Wilson paid $100 for the pest control exterminator to spray the health club.
c. Wilson previously worked as an accountant, earning $3,000 a month.
d. Wilson usually eats four hamburgers a day, priced at $3 each.
Diseconomies of scale are said to exist when inputs are increased by some percentage
and output increases by a(n) __________ percentage, causing unit costs to __________.
a. greater; fall
b. smaller; fall
c. greater; rise
d. smaller; rise
e. equal; fall
In Industry A, the largest four firms together have a 30 percent share of the market and
there are a total of eight firms in the market. In Industry B, the largest four firms
together have a 30 percent share of the market and there are 100 other firms in the
market. If we want to distinguish between the concentration in these two industries, the
best measure to use is the
a. four-firm concentration ratio.
b. horizontal-merger index.
c. vertical-merger index.
d. Herfindahl index.
e. none of the above
Special interest groups are subsets of the general population that
a. attempt to influence government officials for the benefit of the general population.
b. choose to be rationally ignorant because they are interested only in things that the
government is not concerned with.
c. are on the fringes of the political spectrum.
d. a and c
e. none of the above
According to the substitution effect, as the wage rate rises the monetary reward from
working increases and workers will want to work more.
a. True
b. False
If the consumption of a good by one person reduces its consumption by others, then the
good is
a. nonrivalrous in consumption.
b. rivalrous in consumption.
c. nonexcludable.
d. excludable.
e. b and d
Mutually beneficial trade between buyers and sellers drives a market to equilibrium.
a. True
b. False
In 18th century England, higher wages of weavers appears to have led to the invention
of the power loom.
a. True
b. False
Concentration ratios are not perfect guides to industry concentration, because they
a. do not take into account foreign competition and competition from substitute goods.
b. take into account foreign competition and competition from substitute goods.
c. do not take into account advertising expenditures.
d. do not take into account tax payments.
Simple majority voting will generate the same result whether taxes are equally divided
or unequally divided.
a. True
b. False
Exhibit 2-3
If PPF1 is the relevant production possibilities frontier, society can choose points that
lie only
a. below PPF1.
b. below or on PPF1.
c. on PPF2.
d. none of the above
Exhibit 27-4
How many units of labor should this firm employ?
a. 1
b. 2
c. 3
d. 4
Variables A and B are directly related. If we plot A on the horizontal axis and B on the
vertical axis, the line that connects combinations of A and B in a two-variable diagram
is
a. parallel to the horizontal axis.
b. downward-sloping (left to right).
c. parallel to the vertical axis.
d. upward-sloping (left to right).
e. a or c
A negative externality exists when
a. a person’s or group’s actions cause a benefit that is felt by others.
b. a person’s or group’s actions cause a cost that is felt by others.
c. market output is less than socially optimal output.
d. a and c
e. b and c
Assume that the buyers of good Z fall into two groups: buyers that have elastic demand
and buyers that have inelastic demand. If the firm selling good Z can charge different
prices to different groups of people, the firm would prefer to ______________ the price
charged to the elastic group and _______________ the price charged to the inelastic
group.
a. raise; lower
b. lower; lower
c. lower; raise
d. raise; raise
Which of the following is a positive macroeconomics statement?
a. The central bank should increase the nation’s money supply.
b. The increase in the nation’s money supply helped push the nation’s unemployment
rate down in the short run.
c. Ford Motor Company’s new advertising campaign ended up hurting General Motors’
sales.
d. The local government ought to spend more on recreational facilities.
Exhibit 24-3
The level of output the profit-maximizing perfectly price-discriminating monopolist
produces is
a. q1.
b. q2.
c. q3.
d. q4.
If the owner of a firm earns zero economic profit, he or she has earned total revenue
equal to his or her
a. implicit costs.
b. explicit costs.
c. accounting profit.
d. implicit costs plus explicit costs.
e. none of the above
Define the term lock-in effect and explain how this effect might make a network
monopoly that benefits from it less likely to innovate.
Alex Rodriguez was the highest played baseball player in 2012, earning about $32
million playing for the New York Yankees. Explain the economic justification for the
owners paying such a high salary; be sure to incorporate the concept of marginal
revenue product (MRP) into your answer.
What does the elasticity of demand for labor measure?List and describe the three
determinants of this type of elasticity.
Explain what an economist means by the phrase €decisions made at the margin.€Cite an
example to support your answer.
Using your own words, describe the law of increasing opportunity costs.Be sure to
explain why this phenomenon occurs and how it helps to contribute to the shape of the
production possibilities frontier.
Explain why it is important to differentiate between the “number of unskilled workers”
and the “number of unskilled labor hours” when evaluating the impact on the market for
unskilled labor of an increase in minimum wage.