Laissez faire refers to a program of minimal interference in the market system.
a. True
b. False
If the interest rate is r (expressed as a decimal number), the present value today of $1 to
be received n years from today equals ____.
a. $1rn
b. $1(1 + r)n
c. $1/(1 + r)n
d. $1/(1 + n)r
A natural monopoly is defined as an industry in which one firm
a. can produce the entire industry output at a lower average cost than a larger number of
firms could.
b. can produce the entire industry output at a lower marginal cost than a larger number
of firms could.
c. is very large relative to other firms that could enter the industry.
d. can earn higher profits if it is the only firm in the industry rather than if other firms
also enter the industry.
Which of the following statements is correct?
a. The “law” of diminishing marginal utility implies that demand curves slope upward
and to the right.
b. If the price of a good falls, the utility-maximizing consumer will assure that marginal
utility rises.
c. If the price of a good falls, the consumer will purchase more of the good in order to
maximize total utility.
d. MU and demand have different underlying consumer behavior assumptions.
In 2005, the median income of renters was $26,317 and the median income of
homeowners was $50,505. If imputed rent were added to household income or rent
became deductible, the personal income tax would become
a. more progressive.
b. more regressive.
c. about proportional.
d. less progressive.
The Industrial Revolution refers to the period 1950-1970, which was characterized by
rapid manufacturing sector growth in the United States.
a. True
b. False
Perfect competition is characterized by numerous firms.
a. True
b. False
“Peak” pricing can best be defined as
a. setting higher prices to reflect higher demand.
b. pricing to obtain maximum profit.
c. setting price higher when demand is more elastic.
d. raising price to determine elasticity.
In economics the true cost of making a choice is the value of what must be given up.
a. True
b. False
Which of the following is true?
a. A nation cannot have a comparative advantage in the production of every good.
b. A nation cannot have an absolute advantage in the production of every good.
c. A nation can have a comparative advantage in the production of every good, but not
an absolute advantage.
d. A nation can have a comparative advantage in the production of a good only if it also
has an absolute advantage.
e. A nation cannot have an absolute advantage in the production of a good unless it also
has a comparative advantage.
China, the last large communist society,
a. has proved that a command economy has far less pollution problems than capitalist
economies.
b. has urban smog levels higher than Los Angeles.
c. has the world’s most sophisticated pollution-control devices.
d. has lowered its level of pollution dramatically since 1980.
Government production accounts for about half of all GDP in the United States.
a. True
b. False
More than 80% of American firms are incorporated.
a. True
b. False
Figure 5-7
In Figure 5-7, budget line B compared to A clearly shows that the
a. price of wine increased.
b. price of beer decreased.
c. price of beer increased.
d. consumers’ money income increased.
Given a typical demand curve and a decline in price, the consumer who wishes to
maximize total utility must increase the quantity purchased of a good to arrive at an
optimal MU = P point.
a. True
b. False
A ptomaine poisoning scare causes a decrease in the demand for canned tuna fish.
Everything else equal, the demand curve for aluminum cans will
a. become steeper.
b. become flatter.
c. fall.
d. rise.
Regulation began in the United States in the 1950s.
a. True
b. False
If not recycled, an input used in production ultimately winds up as a waste product.
a. True
b. False
Average real wages have not risen significantly since approximately 1973.
a. True
b. False
An oligopoly will always use game theory to maximize sales rather than profits.
a. True
b. False
Discounting or computing present value is a way of comparing dollar values that will
appear at different points in time.
a. True
b. False
What does the Herfindahl-Hirschman Index value near 10,000 imply about the market?
a. Pure monopoly
b. Perfect competition
c. Monopolistic competition
d. Oligopoly
The game theory approach to the analysis of oligopoly assumes that oligopolists
a. ignore their interdependence.
b. behave with little forethought.
c. do not take their businesses seriously.
d. act strategically.
Legal limits on prices will tend to cause misallocation of resources because
a. production (or opportunity) cost no longer corresponds to market price.
b. people are unable to determine their preferences at the high or low price.
c. producers no longer have incentive to be profitable.
d. consumers no longer have incentive to spend their income efficiently.
e. All of the above are correct.