A line that is perfectly elastic has an elasticity of demand of zero.
a. True
b. False
In a planned economy,
a. prices are used to coordinate economic activity.
b. central planners set production targets and tell producers how to produce.
c. high prices discourage use of the most scarce resources.
d. central planners allow the price to determine distribution of a product.
Service to consumers of deregulated products has generally not diminished.
a. True
b. False
Given its size, the United States does not have to worry about limitations on resources.
a. True
b. False
Society would be better off with more products that create beneficial externalities.
a. True
b. False
A natural monopoly would benefit by being broken into many smaller firms.
a. True
b. False
Speculators serve no useful function in a market.
a. True
b. False
A firm’s demand curve for labor shifts when the
a. price of its output changes.
b. wage rate changes.
c. number of available workers changes.
d. All of the above are correct.
The marginal utility of a unit of good X
a. is always greater than the total utility of X.
b. is always less than the average utility of X.
c. generally depends on how much X the consumer already has.
d. is always equal to the price of X.
Points below the production possibilities frontier are inefficient because it is possible to
make someone better off without making anyone else worse off.
a. True
b. False
Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol.
As a result, the demand for bran increases at every price by 5,000 bushels and the
supply curve for bran is perfectly price elastic. The quantity of bran consumed will
a. not change.
b. change unless the demand curve is perfectly inelastic.
c. rise by exactly 5,000 bushels.
d. not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic.
Transfer payments are money received as grants from government.
a. True
b. False
If economies of scale exist for a particular production relationship, long-run average
costs will
a. rise.
b. fall.
c. first rise and then fall.
d. be unaffected since there is no direct relationship between the two.
A person’s decision to supply a certain amount of labor in a week is simultaneously a
decision to consume a certain amount of leisure per week.
a. True
b. False
Game theory is based on the idea that each participant makes decisions based on how
she believes the competition will react.
a. True
b. False
Usury laws are often politically popular because
a. few people sympathize with banks and other lenders who are suspected of price
gouging.
b. consumers are in favor of the lower lending rates.
c. those concerned with affordable housing for the poor favor ceilings on mortgage
rates.
d. All of the above are correct.
Marginal cost
a. is the increase in total cost resulting from production of one additional unit of output.
b. is the cost of the marginal unit of output.
c. and the average cost curve are U-shaped.
d. All of the above are correct.
Firms will borrow to finance capital expansion until the MRP of the investment equals
the
a. MRP of labor.
b. marginal cost of the finished good.
c. marginal physical product of capital.
d. interest payment charged for borrowing.
Total expenditure equals price times quantity.
a. True
b. False
An efficient solution to a pricing problem
a. makes both buyers and sellers better off than any other possible solution.
b. may not be the socially “fair” solution.
c. occurs when producers’ total cost of production equals consumers’ total utility from
the output produced.
d. maximizes the output of the good being priced.
Figure 6-2
In Figure 6-2, the price elasticity of demand (dropping all minus signs) is ____ between
P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices
the percentage change in price is ____.
a. smaller; smaller
b. smaller; greater
c. greater; smaller
d. greater; greater
The world price of a commodity will settle at the level where
a. supply and demand are equal within each country.
b. the excess demand of the importing country is equal to the excess supply of the
exporting country.
c. the excess demand in the exporting country is equal to the excess demand in the
importing country.
d. there is no excess demand in the exporting country.
What is the distribution of national income currently among the owners of the factors of
production-land, labor, capital, and entrepreneurship?
Suppose that the government decided to increase interest rates in order to encourage
saving. Would this likely lead to an increase in investment and higher future economic
growth rates? Explain.
For a number of years, General Motors used a pricing strategy designed to maintain at
least 40 percent of the American car market. Does this strategy suggest that GM was
maximizing profits or pursuing an alternative strategy?
What are the reasons that are usually given to justify regulation?
What are the two critically important functions for corporate financing performed by
stock exchanges?