Inputs in production processes are called resources.
a. True
b. False
Production technology determines the relationship of total cost to outputs.
a. True
b. False
Increasing scarcity of a resource causes new supplies to become more and more costly.
a. True
b. False
A quota ordinarily specifies both minimum and maximum amounts of goods that can
come into a country.
a. True
b. False
Research and development refers to the activity of firms, universities, and government
agencies that seek to invent new products and processes.
a. True
b. False
Figure 20-2
At existing wage rates, hospitals face a shortage of registered nurses. Some studies have
suggested that an increase in RN wages will actually reduce the hours supplied by
existing RNs, making it more difficult for hospitals to find RNs. Which panel in Figure
20-2, where the broken line indicates the existing wage rate, illustrates this case?
a. 1
b. 2
c. 3
d. 4
How do legal controls on prices lead to corruption?
a. Persons who benefit from the controls are willing to bribe officials to keep the
controls in place.
b. Persons who make the laws may favor certain groups at the expense of others.
c. Selling in the black market is very profitable, and persons therefore willingly break
the law.
d. Discrimination may occur as a means to limit buying or selling select groups.
e. All of the above are correct.
A tax on cigarettes can be expected to reduce teen smoking more than it reduces adult
smoking.
a. True
b. False
A natural monopoly is characterized by the fact that its average costs increase rather
than decrease when its output expands.
a. True
b. False
Only government restrictions serve as entry barriers.
a. True
b. False
Figure 11-3
In Figure 11-3, which of the following is true, whether or not the monopolist is
maximizing profits?
a. MR < P
b. MC = P
c. MC < AC
d. MR = P
Total physical product shows what happens to the quantity of an output when the firm
changes the quantity of an input.
a. True
b. False
Regarding the price elasticities of demand, which of the following statements is true?
a. Price elasticities vary considerably from product to product
b. Luxurious goods are generally less price elastic.
c. Necessities are generally more price elastic.
d. All of these statements are true.
In perfect competition, an increase in fixed costs will eventually cause all except
a. reduction in industry output.
b. reduction in a firm’s output.
c. reduction in the number of firms.
d. decrease in industry supply.
Specialization of labor makes sense only if there is some means of exchange.
a. True
b. False
The measure used to determine whether two products are substitutes or complements is
called
a. price elasticity of demand.
b. income elasticity of demand.
c. cross elasticity of demand.
d. inverse elasticity of demand.
When a demand schedule is drawn as a graph,
a. price is measured on the vertical axis.
b. quantity is measured on the horizontal axis.
c. the resulting curve has a negative slope.
d. the other variables (besides price and quantity) are held constant.
e. All of the above are correct.
A private good is characterized by excludability and depletability.
a. True
b. False
In practice, taxes on emissions of pollutants have been found to
a. be ineffective in encouraging firms to pollute less.
b. significantly reduce pollution by taxed firms.
c. be less reliable in reducing pollution than direct controls on pollution.
d. cause failures of the pricing system.
In perfect competition there are differences in the products sold by various firms.
a. True
b. False
A free market may produce a misallocation of resources over time because
a. the Fed manipulates interest rates.
b. people have a “defective telescopic faculty.”
c. private risk usually exceeds social risk.
d. All of the above are correct.
The typical total profit graphical presentation is shown as
a. a square.
b. a rectangle.
c. a hill, or mound.
d. an S curve.
If a poor country can “catch up” to a rich country, its productivity rises more rapidly
than the productivity of the rich country.
a. True
b. False