Figure 2.6
Refer to Figure 2.6. Which of the following will NOT cause the production possibility
frontier to shift from ppf1 to ppf2?
A) a decrease in the unemployment rate, assuming a constant labor force.
B) an increase in the stock of capital
C) the discovery of previously unknown natural gas sources
D) an improvement in technology
The income elasticity of demand for low-quality beef is -2. Thus, an 8% decrease in the
quantity of low-quality beef demanded
A) is the result of a decrease in income of 4%.
B) is the result of an increase in income of 0.25%.
C) is the result of an increase in income of 4%.
D) is unrelated to any change in income.
If resources are combined efficiently in production, then the society
A) is producing at the most-desirable point on the production possibility frontier.
B) is producing at a point on the production possibility frontier but not necessarily at
the most-desirable point.
C) is producing at a point outside the production possibility frontier.
D) is experiencing economic growth.
Table 7.1
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.1 above. Which technology is the most capital intensive?
A) A
B) B
C) C
D) D
An equitable distribution of income means that income is
A) evenly distributed.
B) fairly distributed.
C) distributed based on performance.
D) distributed based on need.
Firms will employ an input up to the point where
A) the wage rate equals the productivity of capital.
B) its marginal cost equals its marginal product.
C) the input’s price equals its marginal revenue product.
D) the input’s price equals its marginal product.
Figure 3.9
Refer to Figure 3.9. Assume that there are only two people in the market for coconuts:
Sasha and Kyle. Along the ________ for coconuts, at a price of $14, quantity demanded
would be 7.
A) demand curve for Sasha
B) demand curve for Kyle
C) market demand curve
D) none of the above
Public goods are generally produced by
A) the government.
B) monopolies.
C) perfectly competitive industries.
D) freely functioning markets.
Assume that the marginal cost of producing steel does not include the cost of the
damage to the environment as a result of pollution. By producing where P = MC, the
firm will be producing
A) the efficient amount of steel.
B) more than the efficient amount of steel.
C) less than the efficient amount of steel.
D) a zero quantity of steel.
We derive the ________ for X from indifference curves and a budget constraint by
changing the price of X.
A) supply curve
B) demand curve
C) marginal utility
D) total utility
A firm that retains earnings does the equivalent of
A) lending money to the firm’s shareholders.
B) borrowing money from the firm’s shareholders.
C) decreasing the net worth of the firm’s shareholders.
D) decreasing its own net worth.
Figure 13.1
Refer to Figure 13.1. The demand curve facing an individual producer of wheat is most
likely represented by
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
An economist is studying the pricing behavior of Atlanta’s 100 dog kennels. She says
she will limit her analysis to a time period that allows for neither new kennels to enter
the market nor existing ones to leave it. The economist is referring to the ________
time period.
A) market
B) industry
C) long run
D) short run
Is each of the following situations an example of savings, investment, or neither? In
each case explain your choice.
(a) A savings and loan association lends money for the purchase of “junk” (not backed)
bonds.
(b) John’s income is $25,000 per year; $22,000 is spent on consumer goods and the
remaining money is used purchase stock in the local electric company.
(c) Just before retirement a couple sells their shares of Pacific Bell stock and puts the
proceeds in a bank savings account.
(d) The city of Los Angeles rebuilds highways after an earthquake.
(e) In order to improve the income earning potential of current welfare recipients, the
federal government increases the size of income transfers.
The economic problem can best be stated as
A) How can the economy improve technology so as to shift the production possibility
frontier up and to the right?
B) Given scarce resources, how exactly do societies go about deciding what to produce,
how to produce it, and for whom to produce?
C) Given the fact that the economy is inefficient, how much and what type of
government intervention should be used to improve the efficiency of the economy?
D) What is the best rate of economic growth for a society?
According to the law of supply, there is a
A) negative relationship between price and the quantity of a good supplied.
B) positive relationship between price and the quantity of a good supplied.
C) negative relationship between price and the change in supply.
D) positive relationship between price and the change in supply.
In a monopolistic industry there is(are) ________ firm(s) and ________.
A) many; free entry of new firms
B) many; entry of new firms is blocked
C) a single; free entry of new firms
D) a single; entry of new firms is blocked
Assuming no externalities exist, if a good’s price is more than its marginal cost, then the
benefits consumers derive are ________ than the cost of resources needed to produce it
and ________ should be produced.
A) greater; less
B) greater; more
C) less; less
D) less; more
As you move down an indifference curve, the absolute value of the slope
A) increases.
B) decreases.
C) remains constant.
D) initially decreases and then increases.
Figure 13.3
Refer to Figure 13.3. The marginal revenue of the fourth pound of cheese is
A) $1.
B) $3.
C) $6.
D) $24.
During 2012, Sean’s consumption equals $25,000 and the change in his net worth is
-$5,000. Sean’s economic income for 2012 is
A) $5,000.
B) $20,000.
C) $25,000.
D) $30,000.
Positive economics is an approach to economics that
A) seeks to understand behavior and the operation of systems while making judgments
about their usefulness to society.
B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may
prescribe preferred courses of action.
C) seeks to understand behavior and the operation of systems without making
judgments.
D) examines the role of government in the economy.
Cell phones and blue tooth headsets are complements. An increase in the price of blue
tooth headsets would cause which of the following in the market for cell phones?
A) The equilibrium price and quantity of cell phones would increase.
B) The equilibrium price and quantity of cell phones would decrease.
C) The equilibrium price of cell phones would increase, and the equilibrium quantity
would decrease.
D) The equilibrium price of cell phones would decrease, and the equilibrium quantity
would increase.
Which of the following statements is true?
A) Trade is beneficial because it allows more efficient allocation of resources.
B) Trade is beneficial because it allows consumers to buy goods at cheaper prices.
C) Trade is beneficial because it allows consumption beyond the production possibility
frontier.
D) all of the above
The basic coordinating mechanism in a free market system is
A) quantity.
B) price.
C) a central government authority.
D) the corporation.
To determine the optimal method of production for a good or service, a firm needs to
know
A) the market price of output.
B) the technologies of production that are available to the firm.
C) the prices of inputs.
D) All of the above are correct.
In the short run when the marginal product of labor ________, the marginal cost of an
additional unit of output ________.
A) rises; rises
B) falls; falls
C) rises; falls
D) falls; doesn’t change
Table 7.1
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.1 above. Which technology is the most capital intensive?
A) A
B) B
C) C
D) D
The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price
elasticity demand for heart transplants is
A) 0.
B) 0.
C) -1.0.
D) -100.0.
As the inventory of a firm rises,
A) there is no change in its capital.
B) its intangible capital increases.
C) its tangible capital increases.
D) its social capital decreases.
Normative economics is an approach to economics that
A) seeks to understand behavior and the operation of systems without making
judgments.
B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may
prescribe preferred courses of action.
C) applies statistical techniques and data to economic problems.
D) examines the role of government in the economy.
In 2005, the number of Internet users was ________ per 1,000 people in high-income
countries.
A) 194
B) 523
C) 774
D) 851
Table 10.2
Refer to Table 10.2. Marginal revenue product of the ________ worker is $480.
A) second
B) third
C) fourth
D) fifth
In what way can liability rules lead to a more efficient outcome?
Would you expect the cross-price elasticity of demand between ham and turkey to be
positive or negative? Why?
Why do you supposed that it is easier for a government to protect and maintain a
domestic monopoly for a particular industry but next to impossible to accomplish if this
firm operates internationally?
Evaluate the following statement ” “Economists are fond of saying that there are
positive statements and normative ones but the truth is that all questions are really
normative”.
Identify the two losses of efficiency associated with the imposition of a tariff.
What is the optimal level of provision of a public good?
What is a household’s choice set defined as?
What is meant by decreasing returns to scale?
Which is larger: the present value of $1 two years from now or the present value of $1
one year from now? Explain.
Lance earns $500 per week. He spends his entire income on two goods: movies and
bottles of wine. The price of a movie is $10 and the price of a bottle of wine is $10.
Draw Lance’s budget constraint and identify his opportunity set.
Use the concept of present value to explain the inverse relationship between the interest
rate and the amount of investment a firm undertakes.
Homebuilders will often pay the closing costs (title, insurance, etc.) of prospective
homebuyers? Explain in terms of supply and demand what homebuilders are trying to
do with this practice.
Suppose that the price elasticity of demand for an ice cream cone is -1.9. If the local ice
cream shop owner wants to increase total revenue, what would you recommend he or
she do?
What do economists mean when they say that capital can labor can be both
complementary inputs and substitutes.
What is the shape of a firm’s marginal revenue product curve? Why does it look this
way?