The average work week in the United States has declined to fewer than 40 hours even
though wage rates have been increasing. The best explanation of this phenomenon is
that
a. the labor supply curve shifted to the right
b. the labor demand curve shifted to the right
c. the income effect of rising wages outweighed the substitution effect
d. the income effect of rising wages could not outweigh the substitution effect
e. none of the above
Exhibit 9-11
If the monopolist in Exhibit 9-11 does not price discriminate, the total amount
consumers will spend on its profit-maximizing quantity of output is
a. $95,200
b. $84,000
c. $79,000
d. $53,200
e. $42,000
One effect of the lemons problem in the used car market is that
a. the market is efficient
b. without reliable information, lemons become increasingly common
c. no good cars are offered on the market
d. no lemons are offered on the market
e. good cars sell at more than their market value
Which of the following can be a renewable resource?
a. oil
b. timber
c. coal
d. iron ore
e. uranium
Which of the following would be the best example of a corporation?
a. The legal office of Alias, Smith and Jones
b. A local mom and pop restaurant
c. Microsoft
d. A local hospital
e. A State University
Exhibit 7-21
If the isocost line in Exhibit 7-21 is AB, the optimal quantity of labor is shown at point
a. n
b. p
c. q
d. r
e. s
As a result of legislation to establish a floor price for milk, most dairy farmers will
a. end up earning a normal rate of return in the long run
b. end up earning a zero rate of return in the long run
c. end up earning a negative rate of return in the long run
d. benefit from the increased cost of specialized resources used in dairy farming
e. suffer if they own specialized resources at the time the legislation is passed
Which of the following would shift the production possibilities frontier outward?
a. a reduction in inefficiency
b. a reduction in the size of the labor force
c. an improvement in technology
d. a change in the combination of goods produced
e. increasing opportunity costs
In-kind transfer programs such as Medicaid have increased more rapidly than other
welfare programs over the last decade.
a. True
b. False
A perfectly competitive firm producing 100 units of output per period finds that:
Average total cost is $20;
Average variable cost is $12;
Marginal cost is $18 and increasing;
Price of the product is $15.
This firm should
a. produce more output
b. raise the price of its product
c. reduce production without shutting down
d. shut down (reduce output to zero)
e. do nothing (it is currently maximizing profit)
Which of the following markets would have the highest Herfindahl index? A market
with
a. ten firms of widely different sizes
b. ten firms of approximately the same size
c. five firms of widely different sizes
d. five firms of approximately the same size
e. eight firms exactly the same size
The demand curve for spinach shows the quantity demanded of spinach
a. only at the equilibrium price of spinach
b. at each possible price of spinach
c. as income increases
d. as income decreases
e. at each possible price of a substitute good
The case study on Japanese vending machines is a story that teaches us
a. how a less expensive resource (vending machines) can be substituted for a more
expensive resource (labor)
b. how a more expensive resource (vending machines) can be substituted for a less
expensive resource (capital)
c. how technological innovations (such as vending machines) can eliminate jobs
d. that machines are starting to dominate our lives
e. how a technological unsophisticated economy can begin to use machinery
Privatization requires
a. transparency
b. the training of competent managers
c. the installation of adequate facilities for transportation
d. All of the answers are correct
e. None of the answers is correct
Unions can affect the demand for, but not the supply of, labor.
a. True
b. False
Profit is the payment made for land resources.
a. True
b. False
Any point on a graph represents a combination of particular values of two variables.
a. True
b. False
A constant-cost industry is one
a. that faces constant average costs in the short run
b. that experiences economies of scale
c. that experiences stable demand
d. whose cost curves do not change as new firms enter
e. that faces increasing resource prices as new firms enter
Which of the following transitional economies has become a high-income nation?
a. Czech Republic
b. Kazakhstan
c. China
d. Vietnam
e. None of the answers is correct
Dumping raw sewage into Boston Harbor is an example of
a. a negative externality
b. a positive externality
c. a private cost
d. a sunk cost
e. an inverse cost
In a market economy, income is primarily determined by
a. the productivity of household resources
b. the level of transfer payments
c. government monetary and fiscal policy
d. the geographic distribution of resources
e. the amount of financial assets owned by households
Under representative democracy,
a. the median voter’s preferences are always satisfied
b. citizens no longer have any influence since they do not vote on each issue
c. representatives may reflect the preferences of the median voter
d. less vote trading will occur than under direct voting
e. vote trading is impossible
One difference between perfect competition and monopolistic competition is that
a. in perfect competition, firms cannot earn a long-run economic profit
b. in perfect competition, firms take full advantage of economies of scale in long-run
equilibrium; in monopolistic competition, firms do not
c. only under perfect competition is there ease of entry and exit
d. in monopolistic competition, the firm’s demand curve is horizontal; in perfect
competition, the firm’s demand curve slopes downward
e. in perfect competition, there are many firms; under monopolistic competition, there
are few firms
Exhibit 9-3
The total revenue for the firm in Exhibit 9-3, a monopolist that maximizes profit while
charging all customers the same price, is
a. $2,574
b. $2,808
c. $2,100
d. $1,638
e. $3,300
Exhibit 10-7
In the long run, the firm in Exhibit 10-7 can expect
a. to earn an economic profit of $760
b. earn an economic profit of $950
c. earn zero economic profit
d. earn an economic profit of $990
e. suffer a loss of $1,000
If union demands result in a surplus of labor in some industries, the resulting
a. increased demand for labor in the nonunion sector drives nonunion wages up
b. decreased demand for labor in the nonunion sector drives nonunion wages down
c. increased supply of labor in the nonunion sector drives nonunion wages down
d. increased supply of labor in the nonunion sector drives nonunion wages up
e. decreased supply of labor in the nonunion sector drives nonunion wages up
Exhibit 5-21
What is the price elasticity of supply between $20 and $40 on supply curve S’ in Exhibit
5-21?
a. 0
b. infinity
c. 1
d. 2
e. 10
The assumption of rational self-interest does not rule out the possibility of concern for
other individuals.
a. True
b. False
The law of diminishing marginal returns states that
a. long-run average cost declines as output increases
b. if the marginal product is above the average product, the average will rise
c. as units of a variable input are added to a given amount of fixed inputs, the marginal
product of the variable input eventually diminishes
d. as a person consumes more of a good, the marginal satisfaction from that good
eventually diminishes
e. if marginal product is positive, total product rises
Which of the following is correct when a price floor is set above the equilibrium price?
a. quantity supplied is less than quantity demanded at the set price
b. quantity supplied is equal to quantity demanded at the set price
c. at the set price there will be a shortage
d. The market price is greater than the price floor
e. quantity supplied exceeds quantity demanded at the set price
A temporary resource price differential refers to a price difference
a. that will not lead to a shift of resources among users
b. caused by lack of resource mobility
c. caused by economic rent
d. that, for example, causes more workers to move to higher-paid areas
e. caused by minimum wage legislation
If MUx/Px > MUy/Pyx, the consumer can increase utility by buying more of good x.
a. True
b. False
A firm that maximizes output for a given total cost must be producing where the isocost
line is
a. above the highest isoquant
b. tangent to the highest isoquant
c. intersected by the lowest isoquant
d. intersected by two isocost lines
e. perfectly horizontal