People have less incentive to invest the more concerned they are that their investment
will not be
a. appropriated by government
b. stolen by thieves
c. protected from high tax rates
d. destroyed by civil unrest
e. blown up by terrorists
For a monopolist, P < MR at all quantities.
a. True
b. False
Which of the following explains the recent decline in union membership in the United
States?
a. smaller government safety nets
b. slower technological change
c. the change from a manufacturing to a service-based economy
d. increasing market concentration
e. none of the above
Marginal revenue product is measured in dollars per unit of output.
a. True
b. False
Which of the following statements about indifference curves is not true?
a. The consumer is indifferent among the combinations illustrated along a given curve.
b. Every indifference curve intersects the consumer’s budget line at least once.
c. Indifference curves slope downward.
d. Indifference curves are concave (bowed in toward the origin).
e. Indifference curves do not intersect.
For building contractors, doubling the size of an office building does not require double
the inputs because there are common walls. This is an example of
a. increasing marginal product
b. diminishing marginal returns
c. economies of scale
d. diseconomies of scale
e. constant returns to scale
The slope of an isocost line equals the absolute value of the input prices ratio.
An oligopolist that cheats on a collusive agreement by reducing price will quickly be
forced out of the industry by its competitors.
a. True
b. False
Which of the following statements is true of a monopolist?
a. The firm charges the highest possible price.
b. The firm always earns a profit.
c. The firm might earn a profit in the long run.
d. The firm generates a larger consumer surplus than a perfectly competitive firm.
e. The firm is more production efficient than a perfectly competitive firm.
Which of the following best explains why physical therapists’ salaries have increased
substantially over the last decade?
a. Physical therapists today are smarter.
b. The supply of physical therapists has increased.
c. The supply of physical therapists has decreased.
d. The demand for physical therapists has increased.
e. The demand for physical therapists has decreased.
The marginal social cost curve is downward sloping under variable technology.
a. True
b. False
The most important determinant of price elasticity of supply is
a. price elasticity of demand
b. technological conditions such as how rapidly costs increase when a firm increases its
output
c. whether the production process relies heavily on capital or on labor
d. the number and closeness of available substitutes
e. whether the product is a normal good or an inferior good
Exhibit 19-2
In Exhibit 19-2, the opportunity cost of 1 ton of rice in Costa Rica is
a. 0
b. 10 t-shirts
c. 20 t-shirts
d. 30 t-shirts
e. 40 t-shirts
Featherbedding shifts the marginal revenue product of labor curve to the right.
a. True
b. False
A major difference between social insurance and income assistance programs is that
a. social insurance programs are run by the states and income assistance programs are
run by the federal government
b. funding for social insurance programs comes exclusively from the federal
government, whereas income assistance programs are funded both at the state and
federal levels
c. benefits from social insurance programs are related to a worker’s contributions to the
programs, whereas benefits from income assistance programs are not
d. social insurance programs are available only to households with children
e. income assistance programs are available only to households without children
According to the search model, the marginal benefit of acquiring information about a
product
a. is greater for a doctor than a nurse’s aide
b. is the same for high-income consumers as for low-income consumers
c. is greater for expensive items than for cheap items
d. is greater for cheap items than for expensive items
e. increases as more information is acquired
If a firm is a natural monopoly, its
a. long-run average cost declines over the full range of market demand
b. long-run average cost increases over the full range of market demand
c. fixed cost declines over the full range of market demand
d. fixed cost increases over the full range of market demand
e. long-run average cost declines and marginal cost rises over the full range of market
demand
If the substitution effect is always greater than the income effect, then an individual’s
labor supply curve will
a. bend backward
b. always have a positive slope
c. always have a negative slope
d. be vertical
e. be horizontal
Total fixed cost divided by the level of output yields
a. average variable cost per unit
b. average fixed costs per unit
c. marginal cost per unit
d. average total cost per unit
e. marginal productivity per unit of fixed resource
If the exchange rate changes from 75 cents per euro to $1 per euro, the euro
a. appreciated, since its value has increased
b. appreciated, since the price of U.S. dollars has increased
c. appreciated, making U.S. goods more expensive in Euros
d. depreciated, since its value has declined
e. depreciated, since its value has increased
If a perfectly competitive firm is incurring a short-run loss, it
a. then will incur a long-run loss
b. will shut down
c. will continue to operate in the short run if its fixed cost is covered
d. will continue to operate in the short run if its variable cost is covered
e. will raise its price in the short run
Usually the poorest fifth of the population in a developing country receives more than
20 percent of the country’s income.
a. True
b. False
If a perfectly competitive firm raises its price, its sales decrease to zero.
a. True
b. False
Cartels are inherently unstable.
a. True
b. False
If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied
from 20 to 100 units,
a. demand is elastic
b. demand is inelastic
c. demand is unit elastic
d. supply is elastic
e. supply is inelastic
Exhibit 6-20
Refer to Exhibit 6-20. If D, D” and D”” represent the demand curvesfor the only three
consumers in a market, then the market demand curve will be more _________ than
each of the three individual demand curves.
a. steep (slope will be more negative)
b. elastic
c. flat (slope will be less negative)
d. inelastic
e. both a and d
In the long run in monopolistic competition, a firm will not produce the output level
that minimizes average cost because
a. that output level is less than the profit-maximizing one
b. at that output level, MC is greater than MR
c. at that output level, P is greater than MR
d. demand is horizontal
e. that would leave the firm with excess capacity
Elasticity measures
a. whether a price increase causes quantity demanded to increase or decrease
b. the strength of an economy’s tendency to recover from recession
c. the responsiveness of decision makers to changes in prices, income, or other
variables
d. the profitability of investment in an industry
e. the long-run flexibility of prices in the economy
Depletion of tropical rainforests is an example of
a. a negative externality
b. the use of variable technology
c. adverse selection
d. the use of fixed technology
e. a clearly defined property right
If two perfectly competitive firms produce the same quantity at the market price, then,
at that quantity, they must have the same
a. marginal cost and average total cost
b. marginal cost and average fixed cost
c. average total cost and average fixed cost
d. average fixed cost and average variable cost
e. marginal cost
Exhibit 5-5
In Exhibit 5-5, what is the total revenue to the right of point a?
a. equal to $50, if demand is price inelastic
b. less than $50, if demand is price elastic
c. equal to $50, if demand is unitary elastic
d. more than $50, if demand is price inelastic
e. not enough information to tell
The socially optimal amount of pollution abatement may be less than 100 percent.
a. True
b. False
Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost
$12 per hour to operate. Giving up one hour of labor makes it possible for Manny
Motors to afford
a. 4 fewer robot hours
b. 3/5 more robot hours
c. 1-2/3 more robot hours
d. 3 million more robot hours
e. 5 million more robot hours
If Katherine claims that when it comes to buying shoes, “price is no object,” her
demand curve for shoes is likely to be
a. horizontal
b. nonexistent
c. upward sloping
d. highly inelastic
e. unit elastic
Which of the following is true of marginal revenue for a monopolist that charges a
single price?
a. P = MR because there are no close substitutes for the monopolist’s product.
b. P > MR because the monopolist must decrease price on all units sold in order to sell
an additional unit.
c. P < MR because the monopolist must decrease price on all units sold in order to sell
an additional unit.
d. AR = MR because there are no close substitutes for the monopolist’s product.
e. P = MR only at the profit-maximizing quantity.