Society can produce at a point outside the production possibilities frontier, but only if it
is using all of its resources efficiently.
a. True
b. False
Which of the following statements is correct?
a. Low prices may not always be in the public interest.
b. If prices on scarce resources are set “too low,” consumers will receive the “wrong”
signals and be encouraged to consume more, thus squandering resources.
c. Raising prices on scarce resources is generally politically unpopular.
d. All of the above are correct.
Most Americans would voluntarily support defense without required taxation.
a. True
b. False
A profit-maximizing, monopolistically competitive restaurant serves 60 burgers a day at
a total cost of $180 and earns a total profit of $180. In the long run, everything else
equal, the
a. restaurant will charge more than $6 per burger.
b. restaurant’s average total cost will rise and its total revenue will fall.
c. restaurant will sell more burgers at a lower average profit per burger.
d. All of the above are correct.
Taking advantage of the built-in-loophole in emission taxes implies
a. opportunity to save on taxes by reducing emissions.
b. opportunity to avoid taxes even without cutting emissions.
c. opportunity to increase emission by paying more tax.
d. opportunity to pay less by increasing emission.
The cost of trash removal goes up, in part at least, because labor productivity in auto
manufacturing goes up.
a. True
b. False
The steam engine was first invented by
a. Heron of Alexandria
b. James Wyatt
c. Robert Fulton
d. Denis Papin
In the view of human capital theorists, educational institutions are factories that take
less productive workers as their raw materials and create more productive workers as
output.
a. True
b. False
When a firm’s earnings rise, its stock prices will tend to fall.
a. True
b. False
Dumping is a trade practice in which countries sell goods in a foreign market at cheaper
prices than the goods can be produced domestically.
a. True
b. False
Teenage unemployment rates have consistently been much higher than the overall
unemployment rate and black teenagers have fared worse than white teenagers.
a. True
b. False
A ceiling on interest rates is likely to lead to
a. an increase in lending activity.
b. more rapid capital formation by business.
c. increases in hiring of labor.
d. a shortage of loanable funds.
If parking spaces on a college campus are scarce, with quantity demanded during the
“peak” hours, from 8 a.m. to 11 a.m., far greater than the number of spaces, an
economist would propose as an efficient solution,
a. lowering the parking fees during those hours to compensate students for the longer
search time.
b. charging the same parking fees during all hours of the school day.
c. raising parking fees during the peak hours to encourage some students to schedule
classes during other hours when parking fees are lower.
d. hiring more security guards to patrol for illegal parkers.
A craze for apples in Riverdale increases the quantity demanded at every price by five
bushels. Between any two prices, the new demand curve will be ____ the old demand
curve.
a. more elastic than
b. less elastic than
c. equal in elasticity to
d. More information is needed to predict the relationship.
If two countries each are currently producing two goods, and each begins to specialize
in the good in which it has a comparative advantage, what will happen to total (world)
output?
a. It will increase.
b. It will decrease.
c. It will be unchanged in both countries.
d. It will rise in one country and fall in the other, but the total is unchanged.
e. Uncertain; economic theory has no answer to this question.
In a free-market system, producers will react to an increase in demand when
a. the price goes up.
b. the government announces the increased demand.
c. their costs increase.
d. the free press publishes news of the increased demand.
Only a market economy must answer the questions of what goods to produce, how to
produce them, and for whom to produce them.
a. True
b. False
A good will tend to be more price elastic if it
a. is a luxury good.
b. has no close substitutes.
c. is a small part of the household budget.
d. is a necessity.
How does the task of production planning happen in a laissez-faire economy?
How can bonuses to exceptional employees be considered economic rents?
Show graphically the effect of technological advance on the price of music downloads.
In a separate graph show what happens to the price of CDs as a secondary effect of the
new download technology.
Distinguish between scarcity and shortage.
It has been said that “economics is the science of common sense.” Is economics
synonymous with common sense?
Some companies follow a strategy of sales maximization. They say that this puts them
in close touch with their customers and they can better track the market, responding to
needs more quickly. However, this increases costs because of the need to stock a wider
variety of parts and sizes and colors, etc. What would make this strategy a
profit-maximizing one?