In less developed economies, the distribution of income is
a. more concentrated (i.e., distributed less evenly) than in developed economies
b. less concentrated than in developed economies
c. such that the bottom 20 percent of households define the poverty threshold
d. such that the top 20 percent of households define the poverty threshold
e. completely even
Along a straight-line downward-sloping demand curve, elasticity is
a. constant, but its value cannot be determined without measurement
b. constant and equal to an absolute value of one
c. greater at higher prices
d. greater at lower prices
e. greater in the middle
In regards to monopolistic competition, some economists argue that consumers are
willing to pay a higher price in order to enjoy a wider selection of goods and services.
a. True
b. False
If Jason can wash a car in 20 minutes and wash a dog in 10 minutes, and Megan can
wash a car in 15 minutes and wash a dog in 15 minutes, which of the following
statements is true?
a. The opportunity cost of washing a car is greater for Megan.
b. The opportunity cost of washing a car is one dog bath for Jason.
c. Megan could wash two cars in the time it takes to wash a dog.
d. Jason has both a comparative and an absolute advantage in washing a dog.
e. The opportunity cost of washing a dog is greater for Jason.
A college student working in a minimum-wage job has a __________ opportunity cost
of __________ than a college dean.
a. lower; market work
b. lower; leisure
c. higher; market work
d. higher; nonmarket work
e. higher; leisure
Which form of business organization accounts for the largest proportion of business
sales in the United States?
a. sole proprietorship
b. partnership
c. corporation
d. nonprofit organization
e. conglomerate
The theory that changes in the exchange rate reflect only changes in the price levels of
two countries is called
a. the floating exchange rate theory
b. the fixed exchange rate theory
c. the flexible exchange rate theory
d. purchasing power parity
e. the managed exchange rate theory
When marginal cost is decreasing, total cost is rising.
a. True
b. False
Exhibit 7-3
In Exhibit 7-3, the total product of four workers is
a. 0
b. 10
c. 20
d. 140/4
e. 140
The Pat Summerall School of Diction is employing teachers such that the marginal
revenue product of teachers exceeds the wage rate. The school will
a. reduce its demand for teachers
b. lay off teachers
c. be losing money from those teachers employed
d. hire more teachers
e. increase the price of diction classes
Which of the following would not describe two thirds of the for-profit businesses in the
United States as measured by sheer number of firms?
a. small retail businesses
b. small service operations
c. part-time home-based businesses
d. small farms
e. multinational corporation
Economic development around the globe will be affected by how society nurtures
incentives to create new
a. ideas
b. inventions
c. only ideas and inventions
d. only ideas and artistic creations
e. ideas, inventions, and artistic creations
Suppose that the only maker of a particular type of horse hair clothing exits the industry
because demand is too low. The correct analysis of this situation is that
a. the producer’s decision is irrational, since monopolies are not limited by the demand
curve
b. the producer’s decision is irrational, since monopolies never go out of business
c. the producer’s decision is irrational, since it could simply raise the price
d. the price received by the producer was lower than the marginal cost in the long run
e. the price received by the producer was lower than the average total cost in the long
run
Exhibit 11-6
In Exhibit 11-6, economic rent in equilibrium is represented by area
a. abe
b. befc
c. gfeh
d. cdf
e. bed
Exhibit 2-4
Point f in Exhibit 2-4 represents
a. an efficient combination of good A and good B
b. the only efficient combination of good A and good B
c. the combination of good A and good B that the economy will produce
d. an inefficient combination of good A and good B
e. the only unattainable combination of good A and good B
Most local phone companies
a. face a horizontal demand curve
b. are regulated
c. are called public utilities
d. have tremendous economies of scale
e. are natural monopolies
An appeal to consumers to purchase union-made products represents an attempt to
a. increase the supply of union labor
b. increase the demand for union labor
c. decrease the supply of union labor
d. decrease the quantity demanded of union labor
e. decrease the demand for union labor
A price ceiling set below the equilibrium price will result in a shortage.
a. True
b. False
In the short run, all costs are fixed.
a. True
b. False
If a manufacturer sells goods abroad for less than they sell for at home, which of the
following is true?
a. An embargo has been established.
b. A quota has been established.
c. The manufacturer is engaged in dumping.
d. There has been an improvement in the terms of trade.
e. Tariffs have been reduced.
Air pollution is more dangerous to the public, but toxic waste generates more public
uproar. Why?
a. Those exposed to the health hazard posed by the toxic waste site are usually less sure
that exposure has occurred.
b. Those exposed to the health hazard posed by the toxic waste site are usually more
sure that exposure has occurred.
c. Fewer people cause air pollution than toxic waste.
d. Fewer people are affected by air pollution than by toxic waste.
e. Toxic waste causes more illness and death than air pollution does.
Expenses for room and board
a. are opportunity costs of attending college, because they are subsidized by the
government or by the college
b. are opportunity costs of attending college since they involve cash expenditures
c. are opportunity costs of attending college if you are on scholarship, but not otherwise
d. are not usually part of the opportunity cost of attending college, because you would
have to live somewhere and eat something even if you didn’t attend college
e. are not usually part of the opportunity cost of attending college, because they are
already included in room and board charges, and we wish to avoid double counting
A cartel’s profit-maximizing price is
a. on the demand curve at the quantity where marginal cost equals marginal revenue
b. on the demand curve where it intersects its marginal cost curve
c. the highest price possible
d. determined by using the cost-plus pricing model
e. where the kink in the demand curve occurs
The simpler a production process is,
a. the greater the cost of production
b. the greater the transaction cost of using markets
c. the more likely a firm will use the market to organize production
d. the more likely a firm will used centralized control to organize production
e. the more likely that transaction costs increase by using centralized control of
production
International trade occurs because the opportunity cost of producing specific goods
differs across
a. firms
b. individuals
c. regions of the U.S.
d. countries
e. households
If all of the returns to a resource are in the form of economic rent,
a. the price of that resource is determined exclusively by supply
b. the price of that resource is determined exclusively by demand
c. the price and quantity of that resource are determined exclusively by supply
d. the price and quantity of that resource are determined exclusively by demand
e. the equilibrium price is zero
The idea that resources are scarce but wants are unlimited is known as
a. marginal cost
b. opportunity cost
c. sunk cost
d. resource cost
e. production cost
Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and
labor. If the price of labor is $5 per hour and the firm can afford to operate its copy
machine for 5,000 hours if it hires no labor, the slope of an isocost line when labor is
measured on the horizontal axis is
a. -5/8
b. -8/5
c. -1/5
d. -5
e. -1/4
If a firm is hiring in a perfectly competitive labor market, the firm’s marginal labor cost
(or marginal resource cost) curve slopes downward.
a. True
b. False
Which of the following would most likely increase the supply of college textbooks?
a. five major publishers go out of business
b. paper costs double
c. the wage rate of printers increases
d. producers expect the price to rise in the future
e. technology of book production improves