It can be shown that average revenue and price are always equal.
a. True
b. False
The Organization of Petroleum Exporting Countries is a
a. professional trade association for oil companies.
b. cartel.
c. consortium for joint ventures in oil exploration.
d. loose collection of democracies that promote international pipelines.
Critics of affirmative action programs argue that they
a. promote statistical discrimination.
b. impair economic efficiency by preventing firms from freely choosing the most
productive employee for a particular job.
c. are not as efficient as quota systems at hiring women and minorities.
d. All of the above are correct.
A tax that does not change consumers’ behavior creates no
a. economic burden.
b. excess burden.
c. tax revenue.
d. tax incidence.
Which of the following can be said about a monopoly?
a. Monopolies are always inefficient and are therefore the least desirable form of
market.
b. They can cause a shift in the demand curve to benefit society.
c. They may aid in innovation.
d. All of the above are correct.
An open economy produces most of the goods and services that it needs, with few
imports and exports.
a. True
b. False
The law of diminishing marginal utility explains why
a. most individual demand curves are straight lines.
b. the consumer’s optimal purchase is at the tangency of an indifference curve and the
budget line.
c. most individual demand curves slope downward.
d. marginal utility falls when total utility falls.
Explain whether the market produces too little, too much, or the right amount: (a) of
goods with detrimental externalities; (b) of goods with public good characteristics.
The infant industry argument is valid when
a. a new industry is suffering financial losses.
b. a new industry is less efficient than foreign competitors.
c. the industry’s prospective gains are sufficient to repay the social losses incurred while
it is being protected.
d. the industry is not likely to be profitable in the future.
Direct cash grand programs are thought to be an example of an efficient redistribution
program.
a. True
b. False
A production possibilities frontier shows the combinations of various goods that should
be produced.
a. True
b. False
Define the following terms and explain their importance to the study of economics.
a. pure monopoly
b. barriers to entry
c. patent
d. natural monopoly
e. sunk costs
When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold
10 percent more tankfuls. The price elasticity for compressed air is
a. 2.
b. 1/2
c. 1
d. 20
A perfectly competitive firm is a “price maker.”
a. True
b. False
The takeover process does not use up capital; it merely redistributes it.
a. True
b. False
Perfectly inelastic demand curves are vertical.
a. True
b. False
A country has an absolute advantage over another in the production of widgets if it can
produce
a. widgets using smaller quantities of resources than can the other country.
b. more widgets than can the other country.
c. widgets more efficiently than can the other country.
d. widgets at a lower opportunity cost than can the other country.
Some critics of antitrust are worried that some firms
a. will seek to increase competition to a dangerous level.
b. will collude in order to avoid the laws.
c. may use antitrust to prevent competition.
d. may go out of business from large damage awards.
Which of the following statements is correct?
a. The demand for capital is derived from the demands for outputs.
b. The demands for output are derived from the demand for capital.
c. The demand for capital is derived from the demand for rent.
d. The demand for rent is derived from the demand for capital.
While it is not certain that U.S. leadership will continue into the next generation, the
nation will continue to enjoy the abundance it has enjoyed in the past.
a. True
b. False
When variable A rises by 10 units, variable B rises by 15 units. The slope of the line
describing this relationship is
a. always 2/3.
b. either 2/3 or 1.5, depending on which variable goes on which axis of the graph.
c. either 1.5 or −1.5, depending on which variable goes on which axis.
d. always −1.5.
The concept of opportunity cost in a fully employed economy with technology and
resources held constant tells us that
a. expansion of output in one industry means expansion cannot occur in another
industry.
b. expansion of output in one industry means output in another industry must contract.
c. output cannot be increased in any industry.
d. output of all industries must contract until more resources are found.
The average total cost curve of a natural monopoly is always
a. upward sloping.
b. horizontal.
c. downward sloping at all points.
d. downward sloping where it crosses the market demand curve for the good.