Within the production possibilities frontier (PPF) framework, choice is depicted by the
a. PPF itself.
b. PPF being bowed outward.
c. need to select among the points making up the PPF.
d. straight-line PPF.
Jaime has an old car that he expects will last for only three more years.He says he
derives $1,000 worth of services from the car each year.He expects the scrap value of
the car to be so low that it is not worth considering. If the interest rate is 7 percent, it is
not likely that he will sell the car unless he is paid more than
a. $763.
b. $2,800.
c. $1,562.
d. $1,925.
e. $2,624.
An overvalued dollar makes U.S.
a. imports rise in price.
b. exports rise in price.
c. monetary policy expansionary.
d. fiscal policy contractionary.
Land rents are high in both New York City and in London. It follows that
a. because land rents are high in both cities, prices (of goods and services) will be high
in both cities.
b. because land rents are high in both cities, we can expect prices (of goods and
services) to be low in order to counter the high land rents.
c. landowners must be more greedy in New York City and London than in cities or
towns where land rents are lower.
d. b and c
e. none of the above
Barriers to entry include all of the following except
a. exclusive ownership of a scarce resource.
b. patents.
c. public franchises.
d. diseconomies of scale.
e. government licenses.
Which of the following statements is true?
a. The lower transaction costs are, the more likely individuals will solve negative
externality problems through a voluntary exchange.
b. The higher transaction costs are, the more likely individuals will solve negative
externality problems through a voluntary exchange.
c. Coase agrees with Pigou that taxing those activities associated with negative
externalities is a good idea.
d. a and c
e. none of the above
What is the definition of producers’ surplus?
a. price received minus maximum selling price
b. maximum selling price minus price received
c. price received minus minimum selling price
d. highest price minus lowest price
e. none of the above
The market demand curve for labor is the horizontal summation of the firms’ demand
curves (MRP curves) for labor.
a. True
b. False
Ford Mustangs would tend to be more elastic in demand than all cars because there are
more substitutes for Ford Mustangs than for cars.
a. True
b. False
If, under a fixed exchange rate system, the dollar price of a Mexican peso is above its
equilibrium level, then the
a. dollar is overvalued.
b. peso is overvalued.
c. dollar has appreciated.
d. peso has depreciated.
When price = $33, quantity demanded = 460. When price = $31, quantity demanded =
500. The price elasticity of demand is _______________, making this an
_____________ good in the price range between $31 and $33.
a. 1.33; inelastic
b. 1.33; elastic
c. 0.75; elastic
d. 0.75; inelastic
e. 6.2; elastic
Exhibit 4-8
Suppose that wheat producerslobby the government for a price floor and receive
one.This price floor is set at PF.What is the size of the producers’ surplus at PF?
a. area 2 + 3 + 4 + 5
b. area 2 + 3
c. area 4
d. area 6
If quantity demanded is completely unresponsive to changes in the price of good XYZ,
then demand for good XYZ is
a. inelastic.
b. unit elastic.
c. elastic.
d. perfectly elastic.
e. perfectly inelastic.
Which of the following would increase the economic rent of a factor, the supply curve
of which is perfectly inelastic?
a. an increase in quantity demanded
b. a decrease in quantity demanded
c. an increase in demand
d. a decrease in demand
e. none of the above
An increase in the quantity of resources available
a. shifts the PPF leftward.
b. shifts the PPF rightward.
c. moves the economy to a new point up along a given PPF.
d. moves the economy to a new point down along a given PPF.
Who has the comparative advantage in the production of good Y?
a. Maria
b. Maya
c. Both Maria and Maya
d. Neither Maria nor Maya
Exhibit 25-3
Total cost of this profit maximizing monopolistic competitor is represented by the area
a. 0P1AQ2.
b. 0P3CQ2.
c. P3P1AC.
d. P4P1AD.
Exhibit 31-5
If a positive externality exists, then the external benefits associated with the positive
externality equal the distance between points ____________ and the socially optimal
output is
a. C and A; Q1.
b. D and B; Q1.
c. D and B; Q2.
d. A and B; Q2.
If the price of good X falls and the demand for good X is unit elastic, then the
percentage rise in quantity demanded is __________ the percentage fall in price, and
total revenue __________.
a. greater than; rises
b. less than; falls
c. equal to; remains constant
d. greater than; falls
e. less than; rises
For wage rates to be the same in various labor markets, four conditions must exist: (1)
demand for every type of labor must be __________; (2) no special __________
aspects to any job; (3) all labor is ultimately __________ and can __________ be
trained for different types of employment; and (4) all labor is mobile at __________.
a. heterogeneous; money; homogeneous; costlessly; minimum cost
b. the same; nonpecuniary; homogeneous; costlessly; zero cost
c. high; training; homogeneous; costlessly; zero cost
d. high; nonpecuniary; heterogeneous; costlessly; minimum cost
e. none of the above