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The short-run equilibrium of the firm under monopolistic competition has excess
capacity.
a. True
b. False
Using prices to promote efficiency in the utilization of bridges,
a. higher prices should be charged for the use of the most crowded bridges.
b. lower prices should be charged for the use of the uncrowded bridges.
c. traffic would be equalized among the bridges where space is a scarce resource.
d. All of the above are correct.
Which of the following is true if the opportunity cost of producing a particular good is
less than its accounting profit?
a. Economic profit is zero.
b. Economic profit is negative.
c. Economic profit is positive.
d. Economic profit cannot be determined.
A market system is not considered an effective way of controlling self-interest.
a. True
b. False
A bond with a high yield
a. gives investors a high return on their investments.
b. gives investors a low return on their investments.
c. sells for a high price.
d. sells for a low price.
When workers purchase more leisure and work less at higher wages, the supply curve
a. is vertical.
b. is horizontal.
c. is positively sloped.
d. is backward bending.
The marginal rate of substitution represents the maximum amount of one commodity a
consumer is willing to give up in exchange for one more unit of another commodity.
a. True
b. False
Vertical equity in income taxation refers to the notion that persons with different levels
of income should be taxed differently.
a. True
b. False
Free markets produce relatively high levels of efficiency but low rates of growth.
a. True
b. False
A firm in short-run equilibrium always earns positive profits if
a. AC > P > AVC.
b. AR > AC.
c. MR = MC.
d. AC > MC.
Tom is buying a quantity of wheat at which the marginal utility (in dollars) exceeds
price. He should
a. reduce wheat consumption, thus raising P to the level at which MU = P.
b. reduce wheat consumption, thus raising MU to the level at which MU = P.
c. increase wheat consumption, thus raising P to the level at which MU = P.
d. increase wheat consumption, thus lowering MU to the level at which MU = P.
When price is above the equilibrium level, suppliers offer more than demanders wish to
buy.
a. True
b. False
Innovation is the act of generating an idea for a new product.
a. True
b. False
In recent years, established U.S. stock markets have faced significant competition from:
a. new start ups
b. small, regional stock markets
c. foreign stock markets
d. people buying & selling stocks online
Hot dogs and hot dog buns are found to be related by the cross elasticity of demand. If
they are complementary goods, the cross elasticity will be
a. positive.
b. equal to zero.
c. negative.
d. unknown.
A price ceiling is only effective if it is above the market equilibrium.
a. True
b. False
Monopoly as a market structure leads to
a. prices equal to average cost.
b. quick response to economic change.
c. prices that equal minimum long-run average cost.
d. persistent economic profits.
According to the law of comparative advantage, a doctor who is also a talented auto
mechanic should
a. get a part-time job at a gas station.
b. do her own auto repairs and those of her neighbors.
c. hire a professional mechanic to repair her car.
d. only repair the cars of other doctors.
In a long-run equilibrium in a perfectly competitive market, the average firm earns
positive economic profits.
a. True
b. False
