The U.S. Postal Service engages in price discrimination.
a. True
b. False
The U.S. government banned cigarette advertising on radio and television after January,
1971. You would expect to find that after the ban took effect the price of magazine ads
for
a. all goods fell.
b. only cigarettes fell.
c. all goods rose.
d. only cigarettes rose.
It is often asserted that the United States no longer manufactures anything, and that
instead it imports manufactured goods from countries like China. Critically evaluate
this claim.
Define the following terms and explain their importance to the study of economics.
a. poverty line
b. economic discrimination
c. optimal inequality
d. negative income tax
Monopolistically competitive markets feature heterogeneous products.
a. True
b. False
Unlike a perfectly competitive firm, a monopolistically competitive firm
a. faces a perfectly inelastic demand curve.
b. can earn positive economic profit in the short run and in the long run.
c. cannot earn positive economic profit even in the short run.
d. has a negatively sloped demand curve.
The demand for education is determined by the
a. demand for human capital.
b. demand for nonhuman capital.
c. supply of human capital.
d. supply of nonhuman capital.
When a company’s stock is owned by thousands of individuals,
a. management will be very independent.
b. management will be lacking.
c. individuals will band together to socialize the firm.
d. management will be prevented by government from taking any risks.
Figure 8-2
Figure 8-2 shows a manufacturer’s total profit curve. To maximize her total profit, the
manufacturer should produce ____ units of output.
a. 10
b. 12
c. 16
d. 18
Evidence indicates that the average economic profits of invention are
a. well above zero.
b. slightly above zero.
c. equal to zero.
d. less than zero.
If the random walk theory is correct, a prudent investor might choose her stock
portfolio by
a. throwing darts at the newspaper’s financial page.
b. spending money to consult a stock forecaster.
c. spending time analyzing past stock performance.
d. not investing in stocks at all, since price behavior is completely erratic.
Economists believe that the goal of environmental policy should be zero pollution.
a. True
b. False
Everything else equal, the AC curve will shift when
a. the price of the product rises.
b. technical change raises the MPP of one input.
c. output is increased.
d. increasing returns to scale are present.
As a rule, the more of a commodity a consumer acquires, the smaller will be her total
utility from that good.
a. True
b. False
Centrally planned economies are not constrained by the problem of scarcity.
a. True
b. False
The United States produces both automobiles and computers more efficiently than
Mexico. Nevertheless, it is possible that both nations would benefit from trade in these
items. The reason for this is
a. the law of comparative advantage.
b. the inflation-unemployment trade-off.
c. externalities.
d. the cost disease of personal services.
e. attempts to repeal the law of supply and demand.
The New York Stock Exchange is the only place where a corporation can sell stocks
and raise money.
a. True
b. False
The slope of an indifference curve represents the maximum amount of one commodity
that a consumer is willing to give up in exchange for one more unit of another
commodity.
a. True
b. False
The stock market provides two functions for corporate financing: reducing investors’
risk and setting the prices of stocks.
a. True
b. False
In the case of Intimate Bookshop v. Barnes & Noble, Intimate alleged that Barnes &
Noble
a. was bundling products in order to reduce competition.
b. used technological advances to sell at lower prices.
c. was buying books at discriminatory prices.
d. had merged with other competitors in an effort to gain monopoly power.
The federal government of the United States relies heavily on value-added taxes.
a. True
b. False
Under a pure system of laissez faire, the government would not do which of the
following?
a. prosecute criminals
b. provide national defense
c. punish those involved in conspiracies to fix prices
d. establish minimum wages
Central planning is an efficient method for making coordination decisions.
a. True
b. False
A corporation is often financed through stocks and bonds.
a. True
b. False
An economy produces only two goods, paper and scissors. Dyes from paper production
pollute a nearby river. Use a production possibilities curve to illustrate your explanation
of how the unfettered market would fail to provide the efficient mix of paper and
scissors.
The demand for a textbook written by Schwarz and Mobley is Q = 20,000 − 50P;
supply is Q = 2,000 + 100P. Students complain about the high price of textbooks,
resulting in a price ceiling and, unfortunately, a shortage of texts. Below what price will
shortages occur?
What is the shape of average cost curve? Provide the reason for that particular shape.
Draw a graph illustrating a competitive firm in short-run equilibrium that is earning an
economic profit. Be sure to label all curves and axes correctly.
A monopolist sets price at $10 and sells 100 units. The corresponding marginal revenue
is $5 and marginal cost $3 What recommendation regarding price and quantity would
you give this monopolist? Use a graph if you wish.