The effect of a decrease in the price of personal computers, other things constant, is
likely to be best represented by which of the following?
a. a leftward shift of the demand curve
b. a movement leftward along the demand curve
c. a rightward shift of the demand curve
d. a movement rightward along the demand curve
e. a rightward shift of the supply curve
Trade restrictions can take any of the following forms except one. Which is the
exception?
a. tariffs
b. free trade agreements
c. quotas
d. voluntary trade restrictions
e. health and safety restrictions
The more broadly a good is defined,
a. the more substitutes it has so the more elastic is its demand
b. the fewer substitutes it has so the more elastic is its demand
c. the more substitutes it has so the less elastic is its demand
d. the fewer substitutes it has so the less elastic is its demand
e. the more complements it has so the more elastic is its demand
Exhibit 8-5
Consider Exhibit 8-5. If the market price is $15, the minimum loss this perfectly
competitive firm can incur is
a. $10
b. $15
c. $18
d. $19
e. $22
The more price elastic is demand, the larger the portion of a tax that is paid by sellers
a. True
b. False
In his article, “The Nature of the Firm,” Ronald Coase
a. suggested that monopolies may be more innovative than competitive firms
b. argued that the economy should be organized into one large firm
c. provided an answer to the question, “Why do firms exist?”
d. focused on the concept of adverse selection
e. analyzed concentration in U.S. industry
Laws, customs, conventions, and other institutional elements that sustain an economy
fall under the category of
a. rules of the game
b. human capital
c. natural resources
d. financial institutions
e. capital infrastructure
When residential water users are charged a flat monthly rate for water, the marginal cost
of an extra thousand gallons of water to a household is zero.
a. True
b. False
The short-run average variable cost curve
a. is always downward-sloping
b. starts at the origin and always slopes upward
c. starts above the origin and always slopes upward
d. is a horizontal line intersecting the vertical axis
e. slopes downward at low rates of output, then slopes upward at higher rates of output
Exhibit 6-10
Exhibit 6-10 indicates the marginal utilities that Sharrona receives from consuming
different amounts of goods A and B. If the price of A is $2 per unit and the price of B is
$4 per unit, what combination of A and B would maximize Sharrona’s total utility if her
budget is $12?
a. 0 units of A; 3 units of B
b. 4 units of A; 1 unit of B
c. 4 units of each
d. 1 unit of A; 4 units of B
e. 2 units of each
Economics is best defined as the study of how individuals decide to use limited
resources in an attempt to satisfy unlimited wants.
a. True
b. False
If the current account is in deficit, imports of goods and services exceed exports of
goods and services (plus net unilateral transfers).
a. True
b. False
A change in the slope of the isocost line indicates a change in the price of one of the
inputs.
A general conclusion from experimental economics is that market experiments
a. provide empirical support for economic theory
b. do not seem to have much to do with the real world
c. often provide evidence that is contrary to what economic theory predicts
d. indicate the need for significant changes to some economic theories
e. work better than real-world markets work
The overall U.S. balance of payments
a. shows a deficit
b. shows a surplus
c. is the merchandise trade balance
d. equals exports minus imports
e. shows how deficits in one account are exactly offset by surpluses in other accounts
If the exchange rate has been $1.50 per British pound but now falls to $1.25 per British
pound, there will be
a. more U.S. imports from Great Britain because the price of pounds has fallen
b. more exports to Great Britain because the price of pounds has risen
c. fewer exports to Great Britain because the price of the pound has risen
d. more U.S. exports to Great Britain since the price of the dollar has fallen
e. no change in either exports or imports
Exhibit 4-1
Consider Exhibit 4-1. Which of the following best represents a decrease in demand?
a. the movement from A to D
b. the movement from C to E
c. the movement from A to B
d. the movement from F to E
e. the movement from D to B
In a democratic society, the preferences of __________ will often dominate decisions
made by direct majority voting.
a. elected government representatives
b. special interest groups
c. rent seekers
d. senior citizens
e. the median voter
If ABC Corp. is profitable,
a. it must pay dividends to its stockholders
b. pretax profits are either paid as dividends or reinvested in the corporation
c. after-tax profits are either paid as dividends or reinvested in the corporation
d. it is contractually obligated to retain a portion of its earnings
e. it typically uses the profits to buy back its own stock from the underwriter
When consumption of a good creates positive externalities,
a. the private demand curve shifts rightward
b. the private demand curve shifts leftward
c. the private demand curve is below the marginal social benefit curve
d. the private demand curve is above the marginal social benefit curve
e. the equilibrium quantity determined by the free private market is too high
In the short run, a monopolist will shut down when
a. average total cost is greater than price at all output levels
b. average variable cost is greater than average fixed cost at all output levels
c. price is greater than average variable cost at all output levels
d. average fixed cost is greater than price at all output levels
e. average variable cost is greater than price at all output levels
The federal government has major assistance programs aimed at providing all of the
following goods, except one. Which is the exception?
a. housing
b. energy
c. school lunches
d. clothing
e. food
If slope = 2 for a line on a graph with x on the horizontal axis and y on the vertical axis,
then if
a. x decreases by 4, y decreases by 8
b. x = -4, then y = -2
c. y decreases by 4, x decreases by 8
d. x = -4, y = -8
e. x increases by 4, y decreases by 8
Claude’s Copper Clappers sells clappers for $65 each in a perfectly competitive market.
At its present rate of output, Claude’s marginal cost is $65, average variable cost is $45,
and average total cost is $67. To maximize his profit or minimize his loss, Claude
should
a. increase output
b. reduce output but not to zero
c. maintain the present rate of output
d. shut down
e. raise the price
At the end of the production chain that a typical economy moves up along is
a. raw material
b. agriculture
c. hunting and gathering
d. services
e. manufacturing
The law of comparative advantage states that the person who should produce a good is
the person who
a. has the lowest opportunity cost of producing that good
b. can produce that good using the fewest resources
c. will produce that good using the most expensive resources
d. has the most desire for that good
e. has produced that good in the past
If supply is more inelastic than demand is, the
a. more the tax will fall on producers
b. more the tax will fall on consumers
c. less likely that a tax will have an impact on market transactions
d. less likely it a tax will lead to tax avoidance
e. greater the impact that a tax has on consumer expectations
If a monopolist is forced to set price equal to average total cost, economic profit
a. will be negative, and the monopolist may go out of business
b. will be zero
c. will be positive
d. will be negative, and the firm will stay in business if there are significant fixed costs
e. may be positive, negative, or zero
If Sam can chop up more carrots per minute than Joe can, then
a. Joe has an absolute advantage in carrot chopping
b. Joe must have a comparative advantage in carrot chopping
c. Sam has an absolute advantage in carrot chopping
d. Sam must have a comparative advantage in carrot chopping
e. we can conclude nothing about absolute advantage
Exhibit 13-5
Exhibit 13-5 shows data on the various dough-mixing machines that a donut shop is
considering buying. Assume that any dough-mixing machine is expected to last
indefinitely, that operating expenses are negligible, and that the price of donuts is
expected to remain constant in the future. If the market rate of interest is 8 percent,
what size machine should the donut shop buy?
a. none
b. the machine with the one-quart bowl
c. the machine with the two-quart bowl
d. the machine with the three-quart bowl
e. the answer can’t be determined from the given data
Since about 1980,
a. production worker pay in the U.S. has grown faster than CEO pay
b. the typical U.S. CEO has come to earn more than the typical NBA basketball player
c. CEO pay in Europe has grown much faster than CEO pay in the U.S.
d. CEO pay in the U.S. has grown to a very large multiple of production worker pay
e. the ratio of CEO pay to production worker pay in the U.S. has not changed much,
although both groups receive much high pay now
Exhibit 4-1
Consider Exhibit 4-1. Which of the following best represents an decrease in demand?
a. the movement from D to C
b. the movement from C to E
c. the movement from A to B
d. the movement from F to E
e. the movement from D to B