Exhibit 15-5
The natural monopoly depicted in exhibit 15-5, if unregulated would earn how much
profit?
a. $10
b. $20
c. $30
d. $40
e. $50
Exhibit 6-23
In Exhibit 6-23, the marginal rate of substitution of food for clothing between points b
and c is
a. unable to be determined
b. 2
c. 3
d. more than 3
e. 0
Business-class airline tickets cost much more than coach-class tickets because,
compared to householders, businesspeople’s demand for travel is
a. equally elastic
b. unitary elastic
c. more elastic
d. less elastic
e. not a factor in the cost of airline tickets
Consider two resource markets in which the demand curves slope downward. In market
A, the supply curve is horizontal, equilibrium price is $6, and 100 units of the resource
are hired. In market B, the supply curve is vertical, equilibrium price is $20, and 30
units of the resource are hired. Which of the following is true?
a. All of the resource earnings in market A are economic rent.
b. All of the resource earnings in both markets are economic rent.
c. All of the resource earnings in market B are economic rent.
d. None of the resource earnings in either market is an opportunity cost.
e. None of the resource earnings in either market is economic rent.
Exhibit 4-3
If the price of the good described in Exhibit 4-3 is $1.60, then there is a
a. shortage of 30 units
b. surplus of 30 units
c. shortage of 20 units
d. surplus of 20 units
e. surplus of 10 units
Exhibit 5-28
Use the information in Exhibit 5-28 to calculate the value of price elasticity of demand
from point c to d.
a. -5/4
b. -4/5
c. -1/14
d. -14
e. 0
An indifference curve shows
a. combinations of goods that provide the same utility
b. combinations of goods that can be purchased with the same budget
c. combinations of goods that yield the same level of profit
d. the relationship between price and utility
e. the relationship between utility and profits
Exhibit 17-2
In Exhibit 17-2, the market equilibrium price and output (determined exclusively by
private decisions) are
a. $6 and 50 units, respectively
b. $12 and 50 units, respectively
c. $12 and 40 units, respectively
d. $6 and 40 units, respectively
e. not indicated
Inefficiency is a flaw of a command economy because there is less incentive for
resources to flow to their highest-valued uses.
a. True
b. False
Exhibit 11-2
In Exhibit 11-2, total earnings at equilibrium are represented by area
a. a
b. b
c. c
d. a + b
e. b + c
All combinations of goods along a budget line are affordable with a given level of
income.
The respective payments for the resources of natural resources, labor, capital, and
entrepreneurial ability are
a. interest, wages, profit, and rent
b. profit, rent, interest, and wages
c. rent, wages, profit, and interest
d. interest, profit, wages, and rent
e. rent, wages, interest, and profit
The larger the proportion of the consumer’s budget that is spent on a product, the more
elastic that consumer’s demand for the product will be.
a. True
b. False
Suppose Toyota produces 100,000 cars per year at its California plant at an average cost
of $6,000 and it doubles output and total costs by building an identical plant in
Kentucky. Toyota has exhibited
a. diminishing marginal returns
b. economies of scale
c. constant average costs
d. an upward-sloping planning curve
e. production inefficiency
For a perfectly competitive firm, marginal revenue is identical to marginal cost at every
quantity.
a. True
b. False
Personal income in the United States is primarily determined by selling labor services.
a. True
b. False
Suppose the market for hot pretzels in New York City is perfectly competitive. What is
true of demand in this market?
a. The demand curve facing each seller is perfectly elastic.
b. The demand curve facing each seller is perfectly inelastic.
c. The market demand curve is perfectly elastic.
d. The market demand curve is perfectly inelastic.
e. The market demand curve is elastic.
Which of the following would not account for the observed wage differential between
African Americans and whites in the United States?
a. differences in the quantity of on-the-job training
b. differences in the quality of education
c. discrimination by employers
d. differences in job experience
e. differences in access to public assistance programs
The reason economists assume that firms try to maximize economic profit is
a. over time, firms that don’t earn profits will have difficulty securing financing to
survive
b. firms in the real world always maximize profit
c. profit is easier to calculate than revenues
d. if a firm fails to earn a profit in its first year, it will go out of business
e. profit maximization is easier for firms than revenue maximization
Exhibit 7-17
Which of the following is true of point a in Exhibit 7-17?
a. The MRTS of labor for capital is equal to the ratio of the wage rate to the price of
capital.
b. The MRTS of labor for capital is less than the ratio of the wage rate to the price of
capital.
c. The firm would be producing its output at the lowest possible cost.
d. The MRTS of labor for capital is greater than the ratio of the wage rate to the price of
capital.
e. The ratio of the marginal product of labor to the price of capital is equal to the ratio
of the wage rate to the price of capital.
A decrease in the demand for peanut butter could be caused by a(n)
a. increase in the supply of peanut butter
b. increase in the price of peanut butter
c. doubling of the price of bread
d. drought in Georgia that destroyed 30 percent of the peanut crop
e. increase in consumer income
People supply their resources to the highest-paying alternative, even if working
conditions are not equally attractive.
a. True
b. False
Exhibit 12-9
In Exhibit 12-9, the labor supply and labor demand in a unionized labor market is
represented by the demand curve D0 and Supply curve S0. Which of the market
equilibria is the most likely outcome of a union improving labor management relations
which results in an increase in the productivity of labor?
a. a
b. b
c. c
d. d
e. either a or d
Exhibit 9-13
In the short run, the monopolist depicted in Exhibit 9-13 should
a. shut down because P < AVC at some output levels
b. shut down because P < ATC at all output levels
c. continue producing because P > AVC at some output levels
d. continue producing because P > ATC at all output levels
e. continue producing because monopolists never shut down
A self-employed editor and writer is thinking about purchasing a new computer to use
for work. In making this investment decision, the person should take time into account.
a. True
b. False
Exhibit 4-15
Refer to exhibit 4-15. The discovery that breast milk offers greater health protection to
babies than baby formula will cause which of the following to happen?
a. supply shift from S2 to S1
b. movement from a to b on supply curve S1
c. supply shift from S1 to S2
d. movement from c to d on supply curve S2
e. movement from d to c on supply curve S2
If a union is able to restrict the supply of a non-union-made substitute product,
a. wages will increase but employment will decrease
b. wages will increase and employment will increase
c. wages will decrease but employment will increase
d. wages will decrease and employment will decrease
e. the demand for non-union labor will increase
The United States exports more raw materials than finished products.
a. True
b. False
A rightward shift of the Canadian demand curve for foreign exchange will
a. decrease the price of foreign exchange in Canada
b. decrease the value of the Canadian dollar
c. increase the value of the Canadian dollar
d. make foreign goods less expensive in terms of Canadian dollars
e. make Canadian goods more expensive in terms of foreign exchange
Lemon laws are an attempt to reduce __________ in used car markets.
a. symmetrical information
b. adverse selection
c. natural selection
d. moral hazard
e. the winner’s curse
A production function
a. shows the functions of production such as income, consumption, and employment
b. shows the relationship between quantities of inputs used and quantity of output
produced
c. quantifies the amounts of variable inputs needed to produce fixed inputs
d. is the quota a firm manager expects the workers to meet
e. is a theoretical concept having no relevance to real-world production
Which of the following would increase the U.S. demand for foreign currency?
a. an increase in the U.S. demand for foreign goods
b. an increase in incomes abroad
c. a decrease in U.S. incomes
d. a decrease in the U.S. demand for foreign goods
e. an increase in U.S. real interest rates