Suppose the extra cost for a plumber to keep her shop open for one extra hour is $145.
Then, the plumber should not stay open for the extra hour if she can only generate
additional revenue of $145 for that hour.
The total value of production from Ford’s manufacturing plant in Cologne, Germany
would be included in Germany’s gross national product.
After an increase in demand in a constant-cost industry, firms will find themselves with
higher average cost curves.
If, after hiring the 6th worker, a firm’s output falls, then the marginal product of the 6th
worker is negative.
The incidence of a tax depends on whether the government collects the tax from buyers
or sellers.
When a business is set up as a sole proprietorship, the owner of the business faces
limited liability.
A study conducted by Robert Shiller, a Yale Economist, found that a large majority of
the public thinks that increases in inflation will not quickly lead to an increase in wages.
Protectionism refers to the use of trade barriers to shield domestic firms from foreign
competition.
An isoquant is a curve that shows all the combinations of two inputs that will produce
the same level of output.
A successful strategy of price discrimination requires that a firm be a price-taker.
In the 1973 movie Save the Tiger, Jack Lemmon plays Harry Stoner, the CEO of a
clothing manufacturer whose business has fallen on hard times. At one point in the
movie, Stoner convinces his partner to hire someone to burn one of their buildings to
collect on their insurance policy. What term refers to the information problem that led
the insurance company to sell a policy for this building to Stoner and his partner?
A) rational ignorance
B) the principal-agent problem
C) adverse selection
D) moral hazard
Table 4-2
The table above lists the highest prices five consumers are willing to pay for a theater
ticket. If the price of one ticket rises from $10 to $19,
A) only three tickets will be sold.
B) consumer surplus decreases from $31 to $6.
C) consumer surplus increases from $44 to $71.
D) no one will buy a ticket.
Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico
which subsequently drove up natural gas, gasoline, and heating oil prices. Three years
later, once the refining capacity was restored, these prices came back down. The
restoration of refining capacity should
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
The average tax rate is calculated as
A) total income divided by the total tax paid.
B) the change in total tax paid divided by the change in income.
C) total tax paid divided by total income.
D) the change in income divided by the change in total tax paid.
________ in taxes will decrease consumption spending, and ________ in transfer
payments will increase consumption spending.
A) An increase; an increase
B) A decrease; an increase
C) An increase; a decrease
D) A decrease; a decrease
Higher personal income taxes
A) increase aggregate demand.
B) increase disposable income.
C) decrease aggregate demand.
D) both B and C
Which of the following is necessary in order for a firm to successfully practice price
discrimination?
A) The firm must practice product differentiation.
B) The demand for the firm’s product is inelastic.
C) The firm must be able to segment the market for the product.
D) The firm’s transactions costs must be zero.
Figure 11-2
The curve labeled “F” is
A) the total product curve.
B) the average product curve.
C) the marginal product curve.
D) the output supply curve.
Table 2-9
Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in
Guatemala and Honduras. If the two countries specialize and trade, who should export
sailboats?
A) There is no basis for trade between the two countries.
B) Guatemala
C) Honduras
D) They should both be importing sailboats.
Which of the following is not part of an oligopolist’s business strategy?
A) meeting worker health and safety standards required of all firms
B) deciding the level of total output of a new product
C) determining the amount of advertising a new product needs
D) setting the product’s price after considering what rivals will do
Table 22-3
Use the table above to calculate the annual growth rate in GDP. Also calculate the total
percentage change in the growth from 2010 through 2013. Explain the difference
between the average annual growth rate in real per capita GDP from 2010 through 2013
and the total percentage change in growth from 2010 and 2013.
What gives rise to a natural monopoly? How do consumers benefit from a natural
monopoly?
What is the difference between price discrimination and other forms of discrimination?
How are efficiency and inefficiency represented on a production possibilities frontier?
Scott is a manager at a pool cleaning business. He has hired 10 workers to clean pools
for him and is considering what type of payment scheme he should set up for his
workers. He can pay each of his workers $10 per hour to clean pools, or he can pay his
workers $20 for each pool a worker cleans. (It takes 2 hours, on average, for an
employee to clean a pool thoroughly.) If Scott wants to maximize the number of pools
his workers clean in one day, which payment scheme should he use? Explain.
What is the difference between aggregate expenditure and consumption spending?