A workplace externality benefits fellow workers.
The current means of regulating automobile emissions is “command-and-control.”
Specialization in production will increase total output.
If the price elasticity of demand is .5 and the price elasticity of supply is 1, then a 9%
increase in the demand for the product can be expected to increase the price by 6%.
Price discrimination in practice is illegal.
In the short run, monopolistically competitive firms find their profit-maximizing
quantity by setting price equal to marginal cost.
The only way individuals can cope with scarcity is by being self-sufficient.
It is efficient to reduce pollution up until the marginal benefit from reducing the
pollution equals the marginal cost of abatement.
One example of a microeconomic question is, “How will prices in the clothing industry
change if the government bans imports from China?”
If demand increases, the increase in price will be smaller if demand and supply are
highly inelastic.
The government allowed the merger between Interstate Bakeries and Continental
Bakery.
A principle is a self-evident truth that most people readily understand and accept.
Under current WTO rules a country can make imports be more environmentally
friendly than domestic goods.
The individual demand curve shows the relationship between quantity demanded and
the price of a product.
Excess supply in an unregulated market will cause the price of a product to fall.
Another word for elasticity would be flexibility.
A minimum price set below the market equilibrium will lead to excess supply and to a
drop in the total surplus of the market.
An import restriction on automobiles would lead to an increase in the price of
automobiles and a decrease in consumer surplus.
Given the slope of a supply curve, consumers take a relatively smaller share of a tax if
their demand becomes more price elastic.
If the government sets a minimum price below the market equilibrium price. This will
have no economic impact on the market.
Since patents lead to lower quantities and higher prices for new products, society is
necessarily worse off when patents are awarded.
Experience rating systems for pricing insurance encourage firms to discriminate against
older and disabled workers in their hiring practices.
In the United States, traffic collisions have very low external costs.
With a quantity restriction , the total surplus of the market increases. On the contrary,
with the licensing restriction, the total surplus decreases.
The Robinson-Patman Act outlawed predatory pricing.
If the consumer gets 30 utils from consuming four DVDs, 50 utils from consuming five
DVDs and 60 utils from consuming six DVDs, then the consumer’s marginal utility
from the fifth DVD is 10 utils.
Market failure happens when a market does not generate the most efficient outcome.
When prices rise, increases in real income are greater than increases in nominal income.
The recent experience of sub-Saharan Africa has taught economists that institutions
such as the legal system and the regulatory environment play a key role in economic
growth.
A pollution tax on automobile emissions would encourage people to use alternative
means of transportation.
Kaitlyn and Larissa have formed a dog bathing and grooming business business. The
number of dogs they can bathe or groom in any given day is depicted in Table 2.1.
Table 2.1
The opportunity cost of grooming the sixth dog in a day is bathing ________ dog(s).
A) 0
B) 5
C) 6
D) 7
Suppose that Figure 10.5 shows a monopolist’s demand curve, marginal revenue, and its
cost. At the profit maximizing output level and price, the consumer surplus would be:
A) $2,450.
B) $1,225.
C) $612.5.
D) $262.5.
The Clayton Act was passed in order to:
A) declare that the telephone industry is a natural monopoly.
B) strengthen the Sherman Act.
C) change the focus of antitrust law from conduct to structure.
D) all of the above
A reservation price is:
A) the lowest price found so far in a search process.
B) a negotiated price for a product or service.
C) the price at which a consumer is indifferent about additional search for a lower price.
D) a retail price listed on a product.
When the government filed a lawsuit against Microsoft in 1998 alleging that Microsoft
illegally bundled Internet Explorer in its operating software, the government’s objective
was to:
A) foster competition.
B) reduce uncertainty.
C) combat pollution.
D) reduce imperfect information.
The study of external costs is a major concern of:
A) labor economics.
B) international economics.
C) environmental economics.
D) macroeconomists.
The lemons model may cause markets with asymmetric information:
A) to reduce the number of low-quality goods.
B) to reduce the number of high-quality goods.
C) to increase the number of high-quality goods.
D) to increase the average quality of goods.
Recall the application about why movie popcorn costs so much, what happens with the
high demander and low demanders if the movie theater were to lower the price of the
popcorn from $4 to $0.10 and increase the admission from $10 to $12?
A) The low demander will still see the movie and buy popcorn.
B) The high demander will see the movie and buy popcorn same as the low demander.
C) The high demander will see the movie and buy popcorn and the low demander will
not do either.
D) The high demander will not see the movie and buy popcorn.
Consider two individuals, Rose and Sharon, who produce fish and coconuts. Rose and
Sharon’s hourly productivity are shown in Table 3.2. Sharon’s opportunity cost of
producing 1 coconut is:
Table 3.2
A) 3/4 fish.
B) 1 1/3 fish.
C) 3 fish.
D) 4 fish.
What is the largest category in state government spending?
A) education
B) public welfare
C) highways
D) police and correction
Refer to Figure 7.2. Assume that Ashley faces budget line CD with her $120 income.
Then the prices of a hamburger and a book are:
Figure 7.2
A) $2 and $5, respectively.
B) $3 and $6, respectively.
C) $4 and $7, respectively.
D) $5 and $8, respectively.
A change in the price of a good purchased by a consumer would affect that consumer’s:
A) nominal income.
B) real income.
C) demand curve.
D) marginal utility.
In the Staples/Office Depot Case, the government:
A) found that Staples had attempted to drive Office Depot out of the market, and so
they prosecuted them under the Clayton Act.
B) determined that the anticompetitive effects of a proposed merger between the two
firms outweighed the potential savings in production costs, and so they blocked the
proposed merger.
C) found that Office Depot had illegally attempted to monopolize the market.
D) found that Staples had illegally attempted to monopolize the market by using tying
contracts.
Which of the following is a characteristic of a monopolistically competitive market?
I. There are many sellers.
II. Firms sell slightly differentiated products.
III. The demand curve facing each individual firm is horizontal.
A) I and II only
B) I and III only
C) II and III only
D) I, II, and III
Which of the following is an example of scarcity?
A) If you choose to play video games you will not have as much time for exercise.
B) If a city uses an acre of land to build a park there will be less land for houses.
C) If I decide to buy a new car I may not have enough money to go away on vacation
this year.
D) All of the above are examples of scarcity.
Suppose your bank pays you 6% interest per year on your savings account. If prices
increase by 3% per year over that time, approximately how much nominal value do you
gain by keeping $100 in the bank for a year?
A) $6
B) $0
C) $3
D) $106
Table 15.2 shows the preferred budget for a new civic center and the number of voters
in a community who prefer that budget. What budget does the median voter prefer?
Table 15.2
A) 7
B) 8
C) 9
D) 10
If the firm is incurring losses in the short run, then which of the following is true?
A) P < ATC
B) P > ATC
C) P > MC
D) MC > ATC
According to the Application, what effects of the Chinese imports were advantageous to
local communities?
A) lower prices for consumers
B) improved U.S.-China relations
C) a stronger local currency
D) None of the above are correct.
When two people engage in voluntary trade:
A) one will necessarily lose.
B) both will necessarily lose.
C) both will expect to be made better off.
D) each will expect to lose.
According to the infant industry argument for trade protectionism:
A) trade barriers must be used to protect domestic workers.
B) new industries need to be shielded from competition in the early stages of learning
by doing.
C) tariffs imposed to aid new industries should never be removed.
D) new industries are capable of competing with established rivals.
________ activity increases when a person considers losing something of value.
A) Dopamine
B) Insula
C) NAcc
D) Glucose
Suppose the nation of Alphonia was charged with dumping electric lawnmowers in the
nation of Omegalon. The two reasons a nation like Alphonia would dump products in
another nation are:
A) price discrimination and import licensing.
B) outsourcing and predatory pricing.
C) price discrimination and predatory pricing.
D) import licensing and outsourcing.
Suppose buyers in the used car market are willing to pay $4,000 for a plum
(high-quality) used car and $2,000 for a lemon (low-quality) used car. If buyers believe
that 50% of the used cars on the market are lemons (low quality), what would they be
willing to pay for a used car?
A) $2000
B) $3000
C) $3500
D) $4000
Daily Output of Scotland and Poland
Table 18.1
Refer to Table 18.1. If Scotland produces and consumes 5 accordions and 40 bagpipes
while Poland produces and consumes 25 bagpipes and 100 accordions, then we say that
Poland and Scotland are:
A) in autarky.
B) specializing and trading.
C) in limited trade.
D) fully utilizing the benefits of their comparative advantage.
Joe runs a business and needs to decide how many hours to stay open. Figure 2.4
illustrates his marginal benefit of staying open for each additional hour. Suppose that
we observe Joe staying open 3 hours per day. If he is following the marginal principle,
what must his marginal cost be?
Figure 2.4
A) $24
B) $32
C) $40
D) $48
Which strategy has been shown to the most effective strategy to promote cooperation?
A) tit-for-tat
B) grim-trigger strategy
C) low-price guarantee
D) prisoners’ dilemma
Ceteris paribus, if the demand curve for milk is inelastic and the government decides to
impose a tax on it. There is going to be a relatively ________ price hike to eliminate the
excess ________ caused by the tax.
A) large; supply
B) large; demand
C) small; supply
D) small; demand
Recall the application about positive and negative effects from immigration of
low-skilled workers. Which of the following is NOT a result of immigrant labor in the
U.S.?
A) lower prices of products
B) lower costs of production
C) increased wages for low-skill workers
D) increased benefits to consumers
Rent control is an example of the government imposing:
A) a price ceiling.
B) an equilibrium price.
C) a price floor.
D) a minimum supply price.
When supply increases and the supply curve shifts to the right, equilibrium price
________ and equilibrium quantity ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
Positive economic analysis answers what question?
How does one determine whether supply is elastic or inelastic?
The textbook identifies two sources of economies of scale. What are these sources?
Assuming that labor is the only variable input with a fixed production facility, explain
the relationship between the marginal product of labor and the marginal production
cost.
What is the difference between a production possibilities curve and a consumption
possibilities curve?
In order to have reliable information about commercial enterprises and to encourage
other people to invest their time and money ________ have been established to ensure
universal understanding.
Colin spends his income of $100 per week on two goods: pizzas (which cost $8 each)
and milk (which costs $1 per gallon). At his current level of consumption, the marginal
utility from the last pizza consumed is 32 and the marginal utility from the last gallon of
milk is 4. Is Colin maximizing his utility? Why or why not? If not, what should Colin
do to achieve a higher level of utility?
Describe how if a price-fixing game is repeated over and over, the cooperative outcome
might be attained.
Does the text suggest that the falling prices in solar power generation come from
economies of scale?
What are the effects of a minimum wage that is placed above the market equilibrium
wage?
What are GATT and the WTO?
What is an external cost?
The market for chicken used to be perfectly competitive. Then producers like Frank
Perdue started marketing chicken under their name. What did they gain by doing this?
The long-run average cost curve for the XYZ Co. is U-shaped. What does this imply
about the firm’s returns to scale?
What does the consumer’s budget line show?