A perfectly competitive firm is allocatively efficient because price is identical to
marginal cost at every quantity
a. True
b. False
One important source of challenge to De Beers’ control of the diamond market is
a. the additional market supply from Russia, Australia, and Canada
b. the emerging auction markets for diamonds in France and Spain
c. the growing demand for diamonds in industrial uses
d. that its South African mines are not producing as many diamonds as they did decades
ago
e. antitrust legislation in the United States
Exhibit 2-7
In Exhibit 2-7, the opportunity cost of moving from point b to d is
a. 30 mufflers
b. 50 mufflers
c. 100 socks
d. 150 socks
e. 250 socks
It is always rational to acquire more information before making a decision.
a. True
b. False
Which of the following would be shown on IBM’s accounting statement?
a. revenue, implicit costs, explicit costs, and economic profit
b. revenue, implicit costs, explicit costs, and accounting profit
c. revenue, explicit costs, and economic profit
d. revenue, explicit costs, and accounting profit
e. revenue, implicit costs, and accounting profit
Doubling the circumference of an oil pipeline more than doubles the volume of oil that
can be pumped through. This is an example of
a. production inefficiency
b. diminishing marginal returns
c. diseconomies of scale
d. constant returns to scale
e. economies of scale
Because leisure is a normal good, an increase in income
a. decreases the demand for leisure time and reduces the amount of time allocated to
market work
b. decreases the demand for leisure time and increases the amount of time allocated to
market work and/or nonmarket work
c. increases the demand for leisure time and reduces the amount of time allocated to
market work and nonmarket work
d. increases the demand for leisure time and increases the amount of time allocated to
market work and nonmarket work
e. has no impact on the demand for leisure time
During certain periods in the past few decades, if one of the three major breakfast cereal
producers in the United States announced a price increase, the other two announced a
similar price increase. This is a good example of
a. monopolistic competition
b. a cartel
c. a pure monopoly
d. the kinked demand curve model of oligopoly
e. the price leadership model of oligopoly
Using free public space means that sidewalk vendors earn long-run economic profits.
a. True
b. False
Computers and software programs are
a. inferior goods
b. complementary goods
c. goods with a cross-price elasticity of demand of 0
d. substitute goods
e. perfectly elastic goods
Macroeconomics is the study of
a. the behavior of large firms in the marketplace
b. the economic behavior of individual decision makers
c. the behavior of the economy as a whole
d. how to use the fewest natural resources to produce goods and services
e. government’s role as a stabilizing influence on the economy
Exhibit 13-4
Exhibit 13-4 shows data gathered by Memo Co. as it prepares to purchase personal
computers for its sales offices. Assume that the personal computers are expected to last
indefinitely, that operating expenses are negligible, and that the price of Memo’s
product is expected to remain constant in the future. Given the rate of interest, how
many personal computers will Memo Co. select?
a. 40
b. 60
c. 80
d. 100
e. 120
Joe the Economist tells his wife, Jane, that he wants to spend a weekend fishing with
his friends. She replies, “You don’t love me anymore.” Just before she hits Joe with a
croquet mallet, Joe explains to her that she has confused the concepts of
a. marginal utility and price
b. income and price
c. marginal utility and total utility
d. love and death
e. consumer surplus and utility
Oligopolists often sacrifice economies of scale as they expand product variety.
a. True
b. False
Exhibit 11-2
In Exhibit 11-2, economic rent at equilibrium is represented by area
a. a
b. b
c. c
d. a + b
e. b + c
One result of asymmetric information in the market for used cars is that buyers benefit
at the expense of sellers.
a. True
b. False
We say that equilibrium in a perfectly competitive market is allocatively efficient
because
a. the sum of consumer and producer surplus is maximized
b. the sum of consumer and producer surplus is minimized
c. the sum of consumer and producer surplus is zero
d. consumer surplus is maximized
e. producer surplus is zero
Exhibit 9-12
The nondiscriminating monopolist in Exhibit 9-12 will produce where
a. MR = 0
b. MR = MC
c. MC < MR
d. MC = ATC
e. D = MC
Suppose Lorna will buy more sweaters if the price of sweaters rises. She is violating the
a. law of supply
b. law of increasing costs
c. law of large numbers
d. law of diminishing costs
e. law of demand
Demand for clothing tends to be
a. elastic because there are few substitutes for clothing
b. inelastic because there are few substitutes for clothing
c. elastic because expenditures for clothing represent a large part of the consumer’s
budget
d. inelastic because expenditures for clothing represent a large part of the consumer’s
budget
e. elastic because it is a broadly defined good
The timeshare condominium in Florida you bought last year turned out to involve many
extra costs and restrictions that were not apparent when you bought it. This is an
example of
a. natural selection
b. moral hazard
c. hidden actions
d. open-access resources
e. hidden characteristics
Firms that are required to participate in affirmative action programs do end up hiring
more minority employees.
a. True
b. False
Rent seeking activities by special interest groups result in
a. greater economic activity by promoting efficiency in government
b. lower economic activity by diverting resources to less-productive or nonproductive
uses
c. a more equal distribution of income and wealth in the nation
d. lower expenditures by government through an increase in taxes
e. greater efficiency in the private economy and increased wealth for society
The total revenue curve of a perfectly competitive firm
a. is horizontal
b. is vertical
c. has a diminishing slope as output increases
d. has an increasing slope as output increases
e. has a constant slope as output increases
Which of the following is inconsistent with the model of perfect competition?
a. ease of entry into an industry
b. ease of exit from an industry
c. many buyers and sellers in the industry
d. advertising of product differences in the industry
e. a horizontal demand curve facing each firm in the industry
Households supply four basic types of resources. They include all of the following
except
a. natural resources
b. final goods and services
c. capital
d. entrepreneurial ability
e. labor
All combinations of goods along the same budget line represent the same level of
utility.
Which of the following is true of the relationship between price and quantity supplied?
a. There is always an inverse relationship.
b. More is supplied at lower prices.
c. Producers work harder and sell more when the price decreases.
d. There is a direct relationship between price and quantity supplied.
e. It is always true that a higher price leads to a decrease in quantity supplied.
Which of the following U.S. antitrust laws prohibits mergers through the acquisition of
a firm’s assets if the merger would lessen competition?
a. the Sherman Antitrust Act
b. the Clayton Act
c. the Robinson-Patman Act
d. the Celler-Kefauver Anti-Merger Act
e. the Federal Trade Commission Act
The demand for a product is the amount that
a. buyers purchase in the market
b. buyers are willing to purchase at a given price
c. sellers are willing to sell at a particular price
d. buyers are willing and able to purchase at alternative prices
e. buyers are able to purchase at a specific price
Exhibit 20-3
In Exhibit 20-3, all of the following except one would cause the demand for pesos to
shift from D to D”, except one. Which is the exception?
a. an increase in income in the United States
b. inflation in the United States
c. a fall in income in the United States
d. inflation in Central America
e. an increase in wealth in the United States
Work is an attractive use of your time
a. if the utility of consumption made possible by work exceeds the disutility of work
itself
b. whenever you are paid a wage equal to or greater than the minimum wage
c. whenever you derive utility from the consumption made possible through work
d. unless time spent working is a source of disutility
e. only when marginal utility is negative for an additional unit of leisure
Resource owners will supply additional units of a resource as long as doing so
a. decreases their opportunity cost
b. increases their income
c. increases their utility
d. decreases their income taxes
e. improves their working conditions