All of the following are associated with a mixed economy except
a. some public influence over the workings of free markets.
b. public ownership mixed in with private property.
c. homogenization.
d. different countries blending the state and market sectors in different ways.
A price cut will decrease the revenue a firm receives if the demand for its product is
a. elastic.
b. inelastic.
c. of unit elasticity.
d. straight elastic.
If new manufacturers enter the computer industry, then, holding all other things
constant,
a. each “old” manufacturer must sell fewer computers than before.
b. some “old” manufacturers must exit the industry.
c. the equilibrium price of computers must rise.
d. the equilibrium quantity demanded of computers must rise.
The labor market is composed of
a. a relatively homogeneous supply of labor and downward-sloping demand curve.
b. a vertical supply curve for labor and relatively elastic market demand.
c. many submarkets for labor of different types.
d. more teenagers than any other age group of labor.
A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried
Chicken than it was to prepare it at home. The researcher included all costs including
the imputed value of time involved to prepare the meal at home. This study illustrates
the
a. value of marginal analysis.
b. law of increasing costs.
c. difference between real costs and money costs.
d. cost disease of the service sector.
A production indifference curve describes the input combinations that will produce a
given output.
a. True
b. False
Physicians have two types of patients: private patients who pay directly or with
insurance, and Medicaid patients whose care is paid for by the state. Physicians must
lower prices to attract more private patients, but they can add unlimited Medicaid
patients at a constant price. The situation facing Dr. Casey is depicted in Figure 11-4.
Units of medical service (say, number of patients x number of visits) are measured on
the horizontal axis. How many units of medical service will Dr. Casey deliver to
Medicaid patients?
a. OA
b. AC
c. OC
d. OD
A common fallacy that is used to oppose trade is the idea that
a. the only gains from trade go to the rich, so the poor must lose.
b. “you get what you pay for.”
c. “if it’s not broken, don’t fix it.”
d. one country’s gain must be another’s loss.
e. what is true for one is true for all.
A firm that sells at a price below average cost is losing money.
a. True
b. False
When the price of a commodity falls, we can expect
a. total utility will fall.
b. marginal utility of the last unit purchased will fall.
c. marginal utility of the last unit purchased will rise.
d. purchases will fall because of a change in marginal utility.
Regarding demand elasticity, which of the following statements is correct?
a. If demand for seller’s product is elastic, a price increase will decrease total revenue.
b. If demand for seller’s product is elastic, a price increase will increase total revenue.
c. If demand is exactly unit-elastic, an increase in price will raise total revenue.
d. If demand is exactly unit-elastic, an increase in price will raise total revenue.
Opportunity cost is the
a. cost incurred when one fails to take advantage of an opportunity.
b. cost incurred in order to increase the availability of attractive opportunities.
c. cost of the best option forgone as a result of choosing an alternative.
d. drudgery of the undesirable aspects of an option.
What is true of depletable resources is that
a. increasing scarcity leads to their total disappearance.
b. they are depleted by gradually using up the supply of homogeneous resources, every
unit of which is equally available.
c. generally the most accessible and cheapest sources are used up so that new supplies
become more costly.
d. their prices must rise at the average rate of inflation.
Economists assume that business firms have many goals, and profit maximization is
just one of them.
a. True
b. False
Carefully define the following terms and explain their importance.
a. variable
b. ray
c. slope
d. contour map
Throughout history, governments have used price controls to
a. protect buyers.
b. protect sellers.
c. serve the “public interest.”
d. All of the above are correct.
International trade usually benefits one trading partner while making the other trading
partner worse off.
a. True
b. False
Explain why an airline may decide to sell an air ticket to a stand-by passenger at less
than the full-fare if there are empty seats on the airplane?
Explain the theory of investment in human capital and the specific role that education
plays in the theory.
If there are no profits in competitive equilibrium, why do firms produce? How can they
stay in business?
Is a benevolent command economy likely to achieve greater efficiency than a purely
competitive market system? Explain.
Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from
Florida and California on the grounds that climatic differences give those two states an
unfair advantage in the production of those products. How would the analysis used to
explain international trade apply?
Why do polluting firms overproduce? Use a completely and correctly labeled graph to
illustrate your answer.
In a past fare war, U.S. Air reduced the price of its Charlotte, North Carolina, to New
York City round-trip fare from $198 to $138 to match American Airlines. U.S. Air did
so reluctantly, saying it would cost the company millions of dollars in revenue.
American, on the other hand, believed the fare cut would increase its revenue. What
different assumptions about the underlying price elasticity of demand did each airline
believe true?
Do firms really seek to maximize profits?
It was once common for people to have servants who helped with the cooking and
cleaning. Use the cost disease of the personal services dilemma to explain why these
services have declined, even though one would expect an increased use in this age of
the two-worker household.