A minimum wage above the equilibrium wage leads to an excess quantity supplied of
labor.
The government uses the buying power of wages rather than face value or nominal
value in reporting changes in “real wages” in the economy.
The tendency for people who have good health insurance to take more risks with their
health is called adverse selection.
One barrier to entry is a patent granted by consumer associations.
When an increase of a firm’s scale of production leads to lower average costs per unit
produced, economies of scale are present.
Demand is elastic along the upper half of a liner demand curve, so an increase in
quantity from a decrease in price decreases total revenue.
When Robert’s income increases, he buys more new clothes. If the income elasticity is
positive”indicating a positive relationship between his income and his demand”then
new clothes are a normal good for Robert.
Hiring a more expensive celebrity endorser will always result in higher firm profits.
The price that a monopolistically competitive firm will charge depends on what its
competitors charge.
If Eddie can produce 40 milk shakes or 20 banana splits in an hour, and Tina can
produce 30 milk shakes or 16 banana splits in an hour, then Tina has a comparative
advantage in producing milk shakes.
One reason for increasing costs industries is that as an industry grows, it drives up the
prices of inputs.
The Celler-Kefauver Act outlawed predatory pricing.
Married couples have a higher poverty rate than female-headed households.
A consumer’s budget set includes all affordable combinations of two goods.
Pollution abatement results in benefits that exceed the costs to society.
The interest on a business loan is an implicit cost.
In general, the demand for a product is more elastic in the long run than in the short run.
A decrease in population would shift the demand curve to the left.
An increase in demand will induce entry by firms in the long run.
A substitution effect comes about because a price reduction of one product gives
consumers more income to spend on other goods.
Monopolistically competitive firms use advertising exclusively to inform customers
about the real differences between their products and their competitors’ products.
Firms earning negative profits in the short run should always shut down.
Employment and the minimum wage are positively correlated.
Macroeconomics helps explain economic fluctuations, why the economy shrinks and
expands and why some of the economy’s resources are idle.
Command-and-control policies lead to higher prices for consumers than pollution taxes
do.
According to the principle of diminishing returns, an additional worker decreases total
output.
Fixed costs are the same in the short run as they are in the long run.
Under tit-for-tat retaliation, a firm will mimic the other firm’s choice from the preceding
period.
National policy always overrides free trade in matters of environmental concern.
The government uses the buying power of wages in reporting changes in “nominal
wages” in the economy.
It is rational for someone who wants to sell a lemon to offer the buyer a money-back
guarantee.
A role of government is to ensure firms bear the full costs of their production.
The World Trade Organization was formed to enforce GATT and other international
trade agreements.
In the 1980s and 1990s, average per capita income increased by a greater percentage in
sub-Saharan Africa than it did in the rest of the world.
Which of the following trade agreements provides for the development of a single
market among its members?
A) North American Free Trade Agreement
B) World Trade Organization
C) European Union
D) Asian Pacific Economic Cooperation
You currently sell the same product to both students and faculty members, and are able
to prevent transfer from one group to the other. Your current prices, quantities sold, and
the absolute values of the slopes of the demand curves are as follows:
If your marginal cost is $1 and you are interested in maximizing your revenues, how
would you adjust your prices?
A) Increase prices for both groups.
B) Decrease prices for both groups.
C) Increase student price and decrease faculty price.
D) Decrease student price and increase faculty price.
The U.S. government defines a poor household as one:
A) with total income three times more than the amount required to satisfy the minimum
needs of a household.
B) below the poverty line of $12,000 in household income.
C) with total income less than the amount required to satisfy the minimum needs of a
household.
D) with disposable income less than $25,000.
Table 3.1 illustrates Willy and Blythe’s hourly production for apples and carrots. From
the table, we can conclude that:
Table 3.1
A) Blythe should specialize in carrots and trade for apples.
B) Blythe should specialize in apples and trade for carrots.
C) Blythe should specialize in both goods.
D) Willy should specialize in both goods.
What is the nominal value of money?
A) what can be purchased with the money
B) discounts taken by multiple purchases
C) savings by shopping on specific days of the week
D) its actual face value
Suppose that for George the marginal benefit per dollar spent on tuna is less than the
marginal benefit per dollar spent on ham. The consumer can always increase his utility
by buying:
A) more tuna and less ham.
B) less tuna and more ham.
C) more of both goods.
D) The consumer is already maximizing utility.
Figure 12.1 shows the market for a successful price-fixing arrangement (cartel) between
two identical firms. When the two firms act like one and charge the same price, the
market price will be ________ and each firm will produce and sell a quantity of
________.
A) $10; 200
B) $10; 100
C) $5; 500
D) $5; 250
Refer to Figure 18.4. With free trade, what is the equilibrium price of gloves in
Duckland?
A) $0
B) $8
C) $9
D) $11
According to the Application about the market for meteorites, people in Morocco
bring meteorites picked up in the desert to local dealers, who then sell them to the
public through Websites. This process is a description of:
A) a market system.
B) a centrally planned economy.
C) a barter economy.
D) a bureaucratic system.
A constant cost industry is more likely to arise in a market where:
A) the industry takes only a small portion of the resources available.
B) the industry takes only a large portion of the resources available.
C) inputs have very different levels of quality.
D) firms have large fixed costs and small marginal costs.
Refer to Table 12.1. If Firms L and M were to merge, the four-firm concentration ratio
would:
Table 12.1
A) rise to 71%.
B) fall to 82%.
C) fall to 40%.
D) rise to 82%.
As output increases, total cost also increases. Therefore:
A) marginal cost is increasing.
B) marginal cost is positive.
C) average fixed costs are increasing.
D) all of the above
The reason why spammers find it profitable to spam is because:
A) it does not cost the spammer anything to send a million emails.
B) it does not cost the spammer anything to receive a million emails.
C) it does not benefit the spammer anything to send a million emails.
D) it does not cost nor benefit the spammer anything to send a million emails.
Suppose a good is produced in a constant cost industry. The market price is $4 and the
equilibrium quantity is 20. After a tax is imposed on the good, the price rises to $5 and
the equilibrium quantity falls to 18. The amount of the tax is:
A) $1 per unit sold.
B) less than $1 per unit sold.
C) more than $1 per unit sold.
D) $0.50 per unit sold.
Average total costs are minimized when:
A) marginal costs begin to increase.
B) marginal costs begin to decrease.
C) marginal cost is greater than average total cost.
D) marginal cost equals average total cost.
A ban on imported avocados would result in:
A) an increase in total surplus because domestic production will increase.
B) no change in total surplus because the reduction in consumer surplus will offset the
increase in producer surplus.
C) a reduction in total surplus because a deadweight loss is created.
D) it is impossible to say what will happen to total surplus.
Refer to Figure 17.2. If the equilibrium wage $12 and a new minimum wage is set at
$15, then:
A) demand will rise.
B) quantity demanded will decrease.
C) quantity demanded will increase.
D) demand will fall.
Which of the following is considered a government transfer?
A) earning from treasury bonds
B) food taxes
C) housing assistance
D) all of the above
The forces of supply and demand will provide a quantity that is:
A) less than the efficient quantity if a good generates external benefits.
B) more than the efficient quantity if a good generates external benefits.
C) exactly the efficient quantity if a good generates external benefits.
D) either more than or less than the efficient quantity if a good generates external
benefits. It is impossible to know whether it will be too much or too little without more
information.
A good that is consumed by a single person or household is:
A) rival.
B) nonrival.
C) excludable.
D) nonexcludable.
If a firm’s production process exhibits diseconomies of scale for all levels of output,
then the firm’s long-run average cost curve will be:
A) horizontal.
B) positively sloped.
C) negatively sloped.
D) U-shaped.
Which of the following is NOT a reason to follow protectionist trade policies?
A) to protect an infant industry from foreign competitors
B) to help firms establish a world monopoly in a particular market
C) to protect domestic workers from foreign competition
D) because buying domestic goods is a patriotic act
If incomes increase and electricity is a normal good, then:
A) the demand for electricity increases.
B) the demand for electricity decreases.
C) the quantity demanded for electricity decreases.
D) the quantity demanded for electricity increases.
Microeconomic analysis can be used to:
A) better understand how markets work.
B) make personal or managerial decisions.
C) evaluate the merits of public policies.
D) All of the above are correct.
The insular cortex is a key region of the brain for:
A) cost valuation.
B) benefit valuation.
C) decision making.
D) all of the above.
The use of seat belts and other automobile safety features making bicycling more
hazardous can be explained by the economic concept known as:
A) the real-nominal principle.
B) the marginal principle.
C) the principle of voluntary exchange.
D) the principle of diminishing returns.
Recall the Application. If lower wages due to immigration dominate the benefits of
lower consumer prices:
A) low-skill workers will be worse off.
B) high-skill workers gain at the expense of low-skill workers.
C) immigration creates winners and losers within the economy.
D) all of the above
Refer to Table 14.2, which shows the market for used fishing boats. Which of the
following is true about this market?
Table 14.2
A) The market is in equilibrium.
B) We can expect the price of used boats to fall.
C) We can expect the price of used boats to rise.
D) Buyers’ willingness to pay for a used boat will fall.
Consider Figure 12.3. If Becky and David could coordinate their decisions then:
A) they would each earn profits of 100.
B) they would both choose to charge a low price and earn profits of 90 each.
C) they would both choose to charge a high price and earn profits of 90 each.
D) they would both choose to charge a high price and earn profits of 70 each.
Consider Figure 12.3. If Becky’s payoff in the top rectangle were 300 instead of 90, the
outcome of the game would be that:
A) both choose a high price.
B) both choose a low price.
C) Becky chooses a high price and David chooses a low price.
D) David chooses a high price and Becky chooses a low price.
In the long run, the monopolistically competitive firm in Figure 11.3 would produce
________ units and charge ________ per unit.
A) 7; $50
B) 10; $48
C) 11; $48
D) 10; $45
Describe the Microsoft case.
What is moral hazard?
How does one determine whether demand is elastic, inelastic, or unitary elastic?
Why might a system of marketable pollution permits lead to a higher concentration of
polluted areas than would a command-and-control system?
Explain the two ways that are relevant to consumer decisions in which people differ.
Explain three ways we can use macroeconomic analysis.
List four ways in which product differentiation can be achieved.
Restaurants and retail stores often give 10% senior citizen discounts. Use the concept of
elasticity to explain how this can be profit maximizing behavior.
Under what conditions does an oligopoly market result in the same outcome as
monopoly? What does this imply for the oligopoly’s long-run profits?
Suppose that last year the Tulane University men’s basketball team, the Green Wave,
won the NCAA tournament. As a result, attendance at Green Wave basketball games
has increased dramatically. Explain the difference between the supply of seats for Green
Wave games in the short term and in the long term. How would you describe the
elasticity of supply of seats in the long term?
Describe the Clayton Act.
List four protectionist policies.
Explain why the wind power have economies of scale.
Give five examples of industries that are monopolistically competitive.
What are the main features of the Hart-Scott-Rodino Act?
How does occupational licensing affect the labor market for a particular occupation?