Insurance companies use deductibles and coinsurance to reduce moral hazard.
After an increase in demand in a constant-cost industry, firms will find themselves with
higher average cost curves.
The economic model of consumer behavior explains how consumers’ tastes and
preferences are formed.
If voters lack an economic incentive to become informed about pending legislation,
then their preferences become a constraint on legislators voting for rent-seeking
legislation.
Unlike a perfect competitor, a monopolist faces the market demand curve.
Entrepreneurs bring together the factors of production to produce goods and services.
An increase in a firm’s fixed cost will not change the firm’s profit-maximizing output in
the short run.
Because each customer pays according to her willingness to pay, a consumer maximizes
her consumer surplus under first-degree price discrimination.
Exempting food purchases from sales tax is consistent with the ability-to-pay principle,
although not necessarily consistent with vertical equity.
An increase in perceived risk of foreign assets increased both the financial account
surplus and current account deficit in the United States during the late 1990s.
A college must decide if it wants to offer more adult literacy classes. This decision
involves answering the economic question of “for whom to produce.”
Necessities tend to have more inelastic demands than luxuries.
Crowding out refers to a decrease in government purchases as a result of an increase in
private expenditures.
The full-employment rate of unemployment is zero.
Behavioral economics helps explain why customers ________ at J.C. Penney.
A) favored the policy of everyday low prices and not sales and coupons
B) favored sales and coupons and not the policy of everyday low prices
C) were equally happy with sales and coupons and the policy of everyday low prices
D) responded negatively to both sales and coupons and the policy of everyday low
prices
If official poverty statistics for the United States included transfer payments individuals
receive from the government, such as Social Security payments and other non-cash
benefits such as food stamps,
A) the poverty rate would be lower.
B) poverty would be eliminated.
C) income inequality would be greater.
D) the poverty rate would be overstated.
The Herfindahl-Hirschman Index is one factor used to determine whether a merger
between two firms should be allowed. Which of the following statements regarding the
value of the Index for a given industry is true?
A) If a merger would result in an Index value less than 1,000, the merger would not be
challenged.
B) If a merger would result in an Index value of 1,000 or more, the industry would be
considered a monopoly and the merger would be challenged.
C) If a merger resulted in an Index of between 1,000 and 1,800, the industry would be
considered competitive and the merger would not be challenged.
D) If a merger would increase the Index by 100, the industry would be considered a
monopoly and the merger would be challenged.
The phrase “demand has decreased” means that
A) a demand curve has shifted to the left.
B) there has been an upward movement along a demand curve.
C) there has been a downward movement along a demand curve.
D) a demand curve has shifted to the right.
The aggregate demand curve will shift to the right ________ the initial increase in
government purchases.
A) by less than
B) by more than
C) by the same amount as
D) sometimes by more than and other times by less than
Table 11-7
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
What is the marginal cost per unit of production when the firm produces 100 lanterns?
A) $420
B) $32
C) $11.1
D) $8.1
When the economy enters a recession, your employer is unlikely to reduce your wages
because ________ during a recession.
A) output and input prices generally fall
B) lower wages reduce productivity and morale
C) output prices always fall
D) output prices generally fall and input prices generally rise
A production possibilities frontier with a ________ shape indicates increasing
opportunity costs as more and more of one good is produced.
A) linear
B) bowed inward
C) bowed outward
D) perfectly horizontal
A baseball hat worn by the Boston Red Sox Hall of Fame outfielder Ted Williams was
auctioned on eBay. The three highest bidders and their bids were: Roger Bulava $5,000
Tony Millasiti $4,900
Joe Albano $4,200 What price did Roger have to pay for the Ted Williams hat?
A) $4,200
B) $4,700 (the average of the three highest bids)
C) $4,900
D) $5,000
Why is the study of asymmetric information associated with the market for “lemons”?
A) Sellers of citrus fruit € lemons, oranges, grapefruit € know the difference between
bad fruit and good fruit; buyers do not have this information.
B) Because there is little advertising in the market for lemons, buyers have difficulty
determining the quality of lemons before they are purchased.
C) Potential buyers of used cars have difficulty separating good used cars from bad
used cars; bad used cars are often referred to as “lemons.”
D) Most sellers of used cars have less information about their cars than the dealers who
buy them; used cars are often referred to as “lemons.”
Figure 12-5
Figure 12-5 shows cost and demand
curves facing a typical firm in a constant-cost, perfectly competitive industry. What is
the amount of the firm’s fixed cost of production?
A) $5,400
B) $6,750
C) $8,100
D) It cannot be determined.
“Taxes are what we pay for a civilized society.” This statement was made by
A) Adam Smith.
B) Oliver Wendell Holmes.
C) Herbert Hoover.
D) Franklin Roosevelt.
Decreases in the price level will
A) lower consumption because goods and services are less affordable.
B) raise consumption because goods and services are more affordable.
C) raise consumption because real wealth increases.
D) lower consumption because real wealth decreases.
Raising funds through financial intermediaries is called
A) direct finance.
B) corporate finance.
C) indirect finance.
D) dividend reinvestment.
If firms and workers have adaptive expectations, what impact will contractionary
monetary policy have on inflation, unemployment, and the Phillips curve?
Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should
temporarily shut down in the short run. Identify the shutdown point on the graph.
What is personnel economics?
What is the difference between explicit costs and implicit costs? List three examples
each of explicit costs and implicit costs that may be experienced by a small business.
Present two arguments as to why the Fed should adopt inflation targeting as a
framework for monetary policy.
What does the word “marginal” mean in economics? What is a marginal benefit? What
is a marginal cost? What is marginal analysis?
Table 9-8
Table 9-8 shows the output per week for bows and arrows by Ahmet and MyLinh.
Fill in the following table with the opportunity costs of producing bows and arrows for
Ahmet and MyLinh.
Should the level of pollution be reduced to zero and if not, then to what level?
Table 20-23
The table above lists the actual minimum wage and CPI in 1974 and in 2012. Using the
above table, calculate the real minimum wage for 1974 and 2012. Calculate the rate of
growth of the real minimum wage from 1974 to 2012. Are workers better off in terms of
the purchasing power of a dollar in 1974 or 2012? Explain why.