Is it possible for a perfectly competitive firm to be maximizing profits, but not
achieving resource allocative efficiency?
a. Definitely yes, because it is impossible to achieve both at the same time.
b. Yes, it is possible, but it is not possible to minimize losses without also achieving
resource allocative efficiency.
c. No, it is not possible, because the output at which MR = MC is also the output at
which P = MC.
d. There is not enough information to answer this question.
When the actual Lorenz curve is a 45-degree line, there is
a. perfect income equality.
b. perfect income inequality.
c. a more equal distribution of income than before.
d. a less equal distribution of income than before.
e. the same distribution of income as before.
“In-kind” transfer payments are made
a. when the recipient performs some service in return for the payment.
b. in the form of goods and services.
c. in the form of lower taxes or tax breaks.
d. in the form of cash.
It is possible for the absolute price of a good to rise at the same time that the good’s
relative price is falling.
a. True
b. False
A factor price taker faces
a. a perfectly elastic demand curve for the product it sells.
b. a downward-sloping demand curve for the product it sells.
c. a perfectly elastic supply curve of factors.
d. an upward-sloping supply curve of factors.
e. a perfectly inelastic supply curve of factors.
“Screening” is the process by which
a. wages tend to be equalized as workers move from one labor market to another.
b. firms calculate the point of MRP = MFC.
c. firms try to increase the probability of hiring good employees.
d. discrimination is claimed to be an “information problem.”
Jones has a high rate (of positive) time preference and Smith has a low rate (of positive)
time preference. Which man is more likely to take out a loan to buy a car now?
a. Smith, because he prefers earlier availability of goods to later availability of goods.
b. Jones, because he prefers earlier availability of goods to later availability of goods.
c. Smith, because he prefers earlier availability of goods more than Smith prefers earlier
availability of goods.
d. Jones, because he prefers earlier availability of goods more than Smith prefers earlier
availability of goods.
e. There is not enough information to answer the question.
The fewer substitutes for a good,
a. the lower its income elasticity of demand.
b. the higher its income elasticity of demand.
c. the lower its price elasticity of demand.
d. the higher its price elasticity of demand.
When an insurance company specifies certain precautions that an insured person must
take it is trying to control for moral hazard.
a. True
b. False
Market failure is a situation in which
a. negative economic profits persist in the long run.
b. negative economic profits exist in the short run.
c. the market does not provide the ideal or optimal amount of a particular good.
d. both a and b
e. a, b, and c
Situation 37-2
Dan and Ann live in the same community and both can participate in two activities,
producing and stealing.
Both Dan and Ann realize that they are better off producing and not stealing from each
other than producing and stealing from each other.They agree not to steal from each
other.There is no enforcer of their agreement to not steal.It is likely that
a. Dan and Ann are in a prisoner’s dilemma setting.
b. Dan is in a prisoner’s dilemma setting but Ann is not.
c. Ann is in a prisoner’s dilemma setting but Dan is not.
d. neither Dan nor Ann is in a prisoner’s dilemma setting.
One can determine the consumers’ surplus if the _______________ are known
a. tax paid
b. maximum buying price
c. price paid
d. maximum buying price and price paid
e. maximum buying price and tax paid
Suppose people are in consumer equilibrium buying 10,000 units of good X at a given
price. Then the price of good X falls to $0. It follows that people will buy more of good
X and that the marginal utility of the last additional unit they buy will be __________
the __________ of the 10,000th unit.
a. lower than; marginal utility
b. greater than; average utility
c. the same as; marginal utility
d. greater than; marginal utility
e. none of the above
The practice of companies promoting from within is on the decline, possibly because of
less regulated, increasingly competitive product markets.
a. True
b. False
Describe the difference between the “traditional” view of labor unions and the “labor
union as a collective voice” view of labor unions with respect to the impact that labor
unions have on productivity and efficiency.
Describe the circumstance under which profit maximization is the same as revenue
maximization.Use a hypothetical numerical example to help explain why this is so.
Explain why the ceteris paribus assumption is essential when assessing an economic
theory.Give an example to help support your answer.
Explain what productive efficiency means.Describe how productive efficiency is
represented by a PPF.
Describe who benefits and who loses from tariffs and from quotas.What is the major
difference between the effects of a quota and the effects of a tariff?
Explain what an economist means by the phrase €decisions made at the margin.€Cite an
example to support your answer.
Using supply and demand analysis, explain why there is sometimes a surplus of seats to
watch a television show being taped and other times there is a shortage of such
seats.Assume that tickets to view the taping of a television show are free of charge.