“Assuming the long-run average cost curve is U-shaped, a firm will always seek to
operate at the lowest point on the long-run average cost curve.” True or false?
“A producer wanting to employ optimal quantity of inputs should choose the point
where diminishing returns sets in.” True or false?
The concept of absolute poverty states that anyone who falls too far behind the average
income should be considered poor.
a. True
b. False
Labor markets are generally perfectly competitive markets.
a. True
b. False
Marginal revenue product equals the marginal physical product multiplied by the
quantity demanded.
a. True
b. False
In regulated industries, the optimal regulation is to set price such that MC=P.
a. True
b. False
Two variables that systematically change together are correlated.
a. True
b. False
The perfectly competitive firm has no influence over price because
a. its output is so insignificant relative to the market as a whole.
b. anti-trust laws constrain perfectly competitive firms.
c. consumers establish the prices of products.
d. it doesn’t know its demand curve.
In arriving at the quantity of output and price of its product, a company
a. chooses either output or price, and consumer demand determines the other.
b. has no control over either quantity or price.
c. makes two decisions by setting both optimal output and optimal price.
d. generally leaves both quantity and price decisions to consumers.
Which basic approach to environment policy may be the only workable solution in brief
but serious emergencies that do not allow for time to plan and enact a systematic
program?
a. Taxes on pollution
b. Voluntary compliance
c. Tradable emissions permits
d. Direct controls like legal ceilings
Governmental rules that significantly promoted entrepreneurship first became
prominent during the
a. Great Recession.
b. Age of Enlightenment.
c. Great Depression.
d. Industrial Revolution.
A rise in the price of an input can be expected to lead to a rise in its marginal physical
product.
a. True
b. False
We expect the demand curve in the perfectly competitive industry to be
a. negatively sloped.
b. vertical.
c. horizontal.
d. perfectly elastic.
Statistical studies in the United States have reached the conclusion that for most
workers the response of labor supply to wage changes is
a. quite strong.
b. not very strong.
c. inverted.
d. always zero.
The Department of Justice generally
a. is not involved in merger policy.
b. opposes horizontal mergers but permits conglomerate mergers.
c. opposes only mergers that might reduce competition.
d. opposes mergers whose apparent motive is obtaining economies of scale.
The income of Lebron James above the minimum payment needed to acquire the type
of service he performs is
a. pure profit.
b. economic rent.
c. marginal rent.
d. competitive rent.
Regulatory agencies always protect consumers by forcing regulated firms to sell at the
lowest possible price.
a. True
b. False
Economists consider environmental pollution to be a(n)
a. externality.
b. pure public good.
c. allocatively efficient outcome.
d. public interest outcome.
Which of the following must cope with scarcity?
a. individuals
b. companies
c. governments
d. families
e. All of the above are correct.
Innovation in the U.S. was spurred by:
a. a free high school education in the U.S.
b. an influx of capable immigrants
c. an inexpensive patent system
d. All of the above are correct.
Which of the following is not an example of a type of factor of production?
a. land
b. labor
c. government
d. capital
Even if demand for a resource grows over time, ever-rising prices of the resource that
result from its growing scarcity still discourage consumption.
a. True
b. False
The law of demand states that a lower price increases the amount of a commodity that
people are willing to buy.
a. True
b. False
Specialization is a major obstacle to international trade.
a. True
b. False
The total burden of a tax equals tax collections minus excess burdens.
a. True
b. False
The “law” of diminishing returns rests on the “law” of variable input proportions.
a. True
b. False
Marginal cost is defined by the slope of the total revenue curve.
a. True
b. False
To own a taxicab in New York City, you must own a medallion. New York City
regulates the number of official cabs by limiting the number of medallions. Explain
why the New York cab industry is not competitive by reviewing the four conditions
necessary for competition. NYC violates which one?
If an economy wants to experience economic growth, what decision must it make and
carry out? Explain.
Why are the prices of some regulated industries often higher than they would be if there
were no regulation?
Explain the rules for finding maximum profit using total revenue and total cost and
marginal revenue and marginal cost.
Are there ever exceptions to the law of demand?
Draw a graph illustrating the relationship between the demand curve of the perfectly
competitive firm and the perfectly competitive industry. Label all curves and axes
correctly.
A unit-elastic demand curve never touches or crosses either of the axes. Why?