Suppose Embryonica is an LDC with few skilled workers, a primitive banking system,
and very little electric power. What do we know for sure that Embryonica is lacking?
a. Infrastructure.
b. Political stability.
c. Agricultural sector.
d. Traditional values.
e. Poverty.
Microeconomics approaches the study of economics from the viewpoint of:
a. individual or specific markets. c. government units.
b. the national economy. d. economywide markets.
A monopoly firm can sell its fourth unit of output for a price of $250. In order to sell
more than five units, it must expect to receive a price:
a. equal to $250.
b. greater than $250.
c. less than $250.
d. equal to $340.
e. the price is impossible to calculate with the information given.
A monopsonist hires the amount of labor where the marginal revenue product of labor
equals the:
a. price of the monopsonist’s product.
b. wage rate.
c. marginal factor cost of labor.
d. marginal product of labor.
Exhibit 6A-1 Budget line
Given the prices of two goods, all quantity combinations inside the budget line are:
a. indifferent.
b. efficient.
c. unattainable.
d. attainable.
According to the rule of reason, when would the courts find a monopoly in violation of
the Sherman Antitrust Act?
a. Always-monopoly is per se illegal under the rule of reason.
b. Only when the monopoly created negative externalities.
c. Only when the monopoly engaged in illegal business practices.
d. Only when the monopoly charged excessively high prices.
The number of CDs purchased increased by 50 percent when consumer income
increased by 10 percent. Assuming other factors are held constant, CDs would be
classified as:
a. social goods. c. Giffen goods.
b. normal goods. d. inferior goods.
If a monopsonist offers a wage of $6, he finds that 1,200 people are willing to work for
him. This means that the:
a. marginal factor cost is $6.
b. marginal factor cost is $200.
c. total wage cost is $1,200.
d. total wage cost is $7,200.
e. $6 wage is too high.
“As soon as a mayor announced his/her ‘get tough on crime’ policy on New Year’s day,
criminals got scared and the crime rate went down.” Suppose that the lower crime rate
was actually caused by freezing cold temperatures in Januaryit was just too cold for
anybody to be out robbing other people. Which fundamental hazard of the economic
way of thinking did the mayor make?
a. believing that what’s good for one person is good for the whole group (the fallacy of
composition)
b. failing to take into account the benefits of crime (the payoff fallacy)
c. believing that association is the same as causation
d. failing to understand the difference between positive and normative economics.
If there is a permanent increase in demand for the product of a perfectly competitive
industry, the process of transition to a new long-run equilibrium will include:
a. the entry of new firms.
b. temporarily higher profits.
c. both a and b.
d. neither a nor b.
Exhibit 2-16 Production possibilities curve
In Exhibit 2-16, which of the following points on the production possibilities curve are
efficient production points?
a. A, B, C, U
b. A, B, C, D, U
c. E, U, W
d. B, C, D, U
e. A, B, C, D
Normative economics deals with ____ and positive economics deals with ____.
a. what should be; what is
b. fiction; fact
c. microeconomics; macroeconomics
d. negative aspects; positive aspects
e. changing circumstances; same circumstances
The balance of trade is measured by which of the following expressions?
a. The value of exported goods and services minus the value of imported goods and
services
b. The value of income receipts on investments minus income payments on investments
c. The value of goods exports minus the value of goods imports
d. The value of government spending minus the value of all taxes received
e. The balance on capital account plus the balance on current account
Exhibit 6A-1 Budget line
Moving along a budget line, the prices of both goods:
a. vary and the consumer’s budget is held constant.
b. are held constant and the consumer’s budget varies.
c. and the consumer’s budget are held constant.
d. and the consumer’s budget vary.
The goal of any monopolist is to maximize:
a. economic profits.
b. normal profits.
c. price.
d. consumer welfare.
e. output.
Exhibit 5-7 Demand curve for concert tickets
In Exhibit 5-7, if promoters raise their prices from $10 to $40 per ticket, then their total
revenue will:
a. increase. c. remain unchanged.
b. decrease. d. react unpredictably.
The infant-industry argument about tariffs argues that:
a. it is unfair to levy tariffs on items intended for use by infants.
b. tariffs should be levied on foreign products that compete with new domestic
industries only in the short run.
c. if a newly established domestic industry can survive in the short run, a tariff should
be levied to protect it from foreign competition in the long run.
d. permanent tariffs should be levied on foreign products that compete with those
produced by newly established domestic industries.
A conglomerate occurs when:
a. the products of the merging firms were not related in any manner before the merger
b. one firm is a producer of products, and the other firm is a producer of services
c. one firm is a domestic firm, and the other is a foreign company
d. the firms stood in a buyer-seller relationship before the merger
e. the merger partners were competitors
Exhibit 11-5 Sally’s labor supply data
In Exhibit 11-5, if Sally can produce 2 units of output for every hour that she works,
then:
a. she will earn a wage of $50.
b. she is not productive enough to be hired at all.
c. her MRP is less than her wage.
d. she will work 30 hours.
e. her wage cannot be determined.
A production possibilities curve shows the:
a. dollar costs of producing two different goods.
b. amounts of labor and capital needed to produce one good.
c. various combinations of goods that can be produced.
d. prices of different goods that are produced in an economy.
e. inefficient use of available resources and technology.
Exhibit 5-8 Supply and demand curves for good X
As shown in Exhibit 5-8, assuming good X is an inferior good, a decrease in consumer
income, other factors held constant, will move the equilibrium from point E to point:
a. X. c. Z.
b. W. d. Y.
An advance in technology results in:
a. suppliers offering a larger quantity than before at each given price.
b. suppliers offering the same quantity as before at a lower price.
c. a rightward shift of the supply curve.
d. an increase in supply.
e. all of these.
Opening trade between nations enables each nation’s consumption possibilities to go
beyond the confines of its own production possibilities curve.
A country has a comparative advantage in producing a good when it has the lowest
opportunity cost of producing that good.
A perfectly competitive firm shuts down in the short-run when the market price is less
than the average variable cost.
Distinguish the short run from the long run. Generally, what causes costs of production
to vary with output in the short run? What generally causes costs of production to vary
in the long run?
If the price of good X increases and this causes an increase in the demand for good Y,
then goods X and Y are substitute goods.