Which of the following formulas defines average cost?
a. AC = TC/Q
b. AC = MRP = MFC
c. AC = MPP/Q
d. AC = TC − Q
In the case study discussed in the chapter, the electronics firm was losing money by
selling its calculators at a price that was below average cost.
a. True
b. False
The Securities and Exchange Commission (SEC) oversees the regulation of the
securities market.
a. True
b. False
In the short run, a perfectly competitive firm can make a profit, a loss, or shut down.
a. True
b. False
If all large firms in the economy were broken into smaller firms, the result might be
a. decreased manufacturing efficiency in some industries.
b. increased prices for some manufactured goods.
c. decreased investment in research and development in some industries.
d. All of the above are correct.
The idea of the invisible hand was introduced by
a. Wassily Leontief.
b. Adam Smith.
c. Thomas Jefferson.
d. Mountifort Longfield.
Aid to families with dependent children was
a. a close-to-perfect welfare or public assistance program.
b. criticized because it provided little incentive for recipients to get jobs.
c. contributing to efficient production of goods.
d. superior to a negative income tax for work incentives.
Specialization in production
a. raises productivity.
b. requires money.
c. stimulates exchange.
d. All of the above are correct.
The beginning point of a graph (the 0,0 point) is known as
a. ground zero.
b. mother lode.
c. the origin.
d. square one.
e. the beginning.
Tampering with the price mechanism
a. can be efficient for a while.
b. cannot be attempted in a market economy.
c. can enhance societal welfare if done properly.
d. often produces undesired side effects.
Suppose that with 1 unit of labor, Canada can produce 40 TVs or 20 computers. With 1
unit of labor, Taiwan can produce 30 TVs or 10 computers. Which of the following is
correct?
a. Taiwan has a comparative advantage in the production of computers.
b. Canada has an absolute advantage in the production of neither good.
c. Canada has a comparative advantage in the production of computers.
d. Taiwan has an absolute advantage in the production of computers.
e. Taiwan has an absolute advantage in the production of TVs.
Adam Smith’s book, one of the first systematic treatments of economics, was entitled
a. The Plan of the Ages.
b. The General Theory of Money, Taxes, and Income.
c. The Wealth of Nations.
d. Principles of Economics.
e. Concepts in Moral Philosophy.
Marginal physical product can tell a producer
a. at what point to stop adding inputs to the production process.
b. how much profit will be made at each level of production.
c. how much the last input added to the total amount of revenue.
d. how much the last input added to the total amount of production.
Examples of public goods include national defense, police, and the U.S. Postal Service.
a. True
b. False
When MSC > MPC there are detrimental externalities.
a. True
b. False
During the American Revolution, Washington’s army nearly starved to death after price
controls were enacted to “help” buy food for the army at affordable prices. The
Continental Congress later passed a law which
a. exhorted the public to obey the law and help supply food to the army.
b. passed tax increases to punish those who refused to sell the food.
c. revised the American Law of Supply and Demand.
d. overrode local ordinances and essentially repealed the price controls.
e. called for the repeal of other price control measures.
According to the principle of marginal productivity, if
a. the product price is less than MRP, the firm is using too little of the input.
b. the price of an input rises, the quantity demanded of the input will increase.
c. MRP is greater than product price, the firm should reduce the use of the input.
d. price of the input equals MRP, the firm is maximizing profit.