The higher is an industry’s concentration ratio, the more competitive is the industry.
Answer:
Revenue remains unchanged along a straight-line demand curve.
Answer:
The law of diminishing marginal productivity implies that identical increases in all
inputs eventually will result in smaller incremental increases in total output.
Answer:
According to the contestable market model, if there are no barriers to entry or exit, the
price an oligopolist sets will be equivalent to average total cost.
Answer:
Scarcity exists because economies cannot produce enough to meet the perceived desires
of all individuals.
Answer:
The production techniques available to real-world firms are constantly changing
because of learning by doing and technological change.
Answer:
If demand is highly inelastic and supply shifts to the right, the equilibrium price will
rise significantly while quantity will increase only slightly.
Answer:
If long-run average total cost exceeds marginal revenue, a perfectly competitive firm
will incur losses.
Answer:
The benefits of free trade tend to be highly concentrated whereas the costs are widely
scattered.
Answer:
The more inelastic the demand for agricultural output, the stronger the incentive for
farmers to engage in rent-seeking activities.
Answer:
Attempts to reduce income inequality may lead to greater income inequality.
Answer:
People make decisions every day that reflect a finite (as opposed to infinite) valuation
of their own lives.
Answer:
Movements down the rows (A to E) in the demand table are represented by movements
up along a demand curve.
Answer:
John is maximizing utility by choosing to spend 90 minutes reading a chapter in The
Theory of Moral Sentiments, which will give him 450 units of utility, instead of
spending 20 minutes reading a chapter of Atlas Shrugged, which will give him 200
units of utility. (Assume marginal utility decreases slowly.)
Answer:
The prisoner’s dilemma is a theoretical tool with little in the way of practical
applications.
Answer:
A monopolistically competitive industry has many firms that sell differentiated
products.
Answer:
When the ratios of the marginal utility to the price of goods are equal, you’re
maximizing utility.
Answer:
If marginal costs are rising, average total costs are rising.
Answer:
The marginal cost curve intersects the average fixed cost curve at its minimum point.
Answer:
When gasoline prices rose in the early 2000s, this reduced the demand for SUVs. An
economist would predict that SUV prices would decline or at least not rise as quickly.
Answer:
A country imposing trade restrictions can benefit only if other countries also impose
trade restrictions.
Answer:
A free trade association is a group of countries that allows free trade among its
members and, as a group, puts up common barriers against all other countries’ goods.
Answer:
Traditional economic models highlight social dimensions of economic problems.
Answer:
When demand is perfectly inelastic, there is no change in quantity demanded after a
change in price.
Answer:
Most economists believe that it is impossible for government programs that benefit the
rich also to benefit the poor.
Answer:
Using earnings potential in court cases to place a value on human life implies that
people who earn high incomes are more valuable than all people who do not.
Answer:
When a monopolistically competitive firm is in long-run equilibrium, average total cost
is at its minimum.
Answer:
The profit-maximizing output level minimizes average total cost.
Answer:
Economic science tries to design mechanisms to coordinate people’s actions better.
Answer:
The long-run average total cost curve is considered to be an envelope curve as each
short-run average total cost curve touches it at only one level of output.
Answer:
Assuming that people follow enlightened self-interest allows behavioral economists to
create a single clear-cut model that can be applied across many different contexts.
Answer:
Refer to the graph shown. If hamburger dinners are produced by a pure monopoly firm
that maximizes profit, the monopoly firm will:
A. earn $200 economic profit per day.
B. just cover its opportunity cost.
C. earn $100 per day.
D. go out of business.
Answer:
In a perfectly competitive market:
A. individual producers determine market prices.
B. market supply and market demand determine the price.
C. the entrepreneur determines the price.
D. individual consumers determine market prices.
Answer:
The increase in output obtained by hiring an additional worker is known as:
A. the average product.
B. the marginal product.
C. the total product.
D. value added.
Answer:
Refer to the graph shown. Given supply, S0, and demand, D, what tariff would the
government have to impose on lumber imported from Canada to reduce imports to 600
tons?
A. $2 a ton
B. $7 a ton
C. $13 a ton
D. $6 a ton
Answer:
Refer to the graph shown. A shift from S0 to S1 would most likely occur for what
reason?
A. A decrease in the number of suppliers in the market
B. An increase in taxes levied on producers of CDs
C. An increase in the price of CDs
D. A decrease in the cost of producing CDs
Answer:
If employers were made responsible for injuries suffered by employees while working
at home:
A. there might be an adverse selection problem since employees have better
information about the safety conditions of their own homes than employers do.
B. employers would never permit employees to work at home.
C. more employees would be able to work safely at home.
D. there might be an adverse selection problem since employers have better information
about the safety conditions of their employees than the employees have themselves.
Answer:
Refer to the graph shown. If price is increased from $3 to $4, consumer surplus will fall
by:
A. 25.
B. 50.
C. 100.
D. 125.
Answer:
One advantage of a sole proprietorship over a corporation is:
A. limited liability.
B. the ability to share work and risks.
C. ease of formation.
D. greater ability to obtain funds.
Answer:
Our ability to manage Social Security as a “pay-as-you-go” program (in which taxes
collected from those currently working are used to make benefits payments to those
currently retired) is impaired when the “dependency ratio” (defined as the number of
retirees per worker) increases. The current concern about the stability of Social Security
is based primarily on projections that there will many more retirees per worker when
the baby boomers begin to retire. Then, if we want to maintain a pay-as-you-go system,
we can:
A. lower payroll taxes to ease the burden on those currently working.
B. raise payroll taxes to compensate for the increase in the dependency ratio.
C. lower payroll taxes to compensate for the increase in the dependency ratio.
D. raise payroll taxes to ease the burden on those currently working.
Answer:
“Government should not use price controls” is an example of:
A. positive economics.
B. normative economics.
C. the art of economics.
D. Marshallian economics.
Answer:
Private property rights:
A. are essential elements of a market economy.
B. do not need to be enforced in market economies.
C. must be established before a socialist economy can function properly.
D. ensure an equitable distribution of income in market economies.
Answer:
Refer to the graphs shown. If income is $60 and the price of Y is $3, a decrease in the
price of X from $3 to $2 would cause a movement:
A. from point A to point B.
B. from point C to point B.
C. along the demand curve from point D to point E.
D. along the demand curve from point E to point F.
Answer:
The incentive effect refers to how much a person will change his or her:
A. hours worked in response to a change in the wage rate.
B. wage rate in response to a change in productivity.
C. quantity demanded of a taxed good in response to a change in the tax rate.
D. wage rate in response to a change in the tax rate on earnings.
Answer:
A company that explicitly takes on a social mission in addition to profit-seeking is
considered a:
A. social welfare organization.
B. benefit corporation or L3C.
C. nonprofit organization.
D. social partnership.
Answer:
What distinguishes scientific from engineering models?
A. Scientific models are likely to be more useful than engineering models.
B. Scientific models require mathematics, whereas engineering models do not.
C. Scientific models rely on assumptions, whereas engineering models do not.
D. Scientific models focus on understanding, whereas engineering models focus on
policy.
Answer:
Which of the following groups might be expected to support high USDA standards for
imported citrus fruit that are enforced so strictly that few foreign producers would be
able to meet the requirements?
A. Orange and grapefruit producers in other nations
B. Citrus fruit consumers in New England, where citrus cannot be grown easily
C. Orange growers in Florida
D. Shipping companies that import agricultural goods from other countries
Answer:
Duties ranging from 28 percent to 113 percent on Chinese frozen and canned shrimp are
an example of:
A. a policy to protect American fisheries from overfishing.
B. a policy using regulations and taxes to protect American consumers.
C. a policy of protecting domestic producers from foreign producers.
D. a policy of protecting American consumers from foreign producers.
Answer:
As the price of tomatoes fell from $2.5 to $2, the quantity imported from Mexico fell
from 1,800 tons to 900 tons. The elasticity of supply of tomatoes imported from Mexico
is:
A. 0.25.
B. 0.3.
C. 3.0.
D. 5.
Answer:
If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $2,
and U.S. workers produce 5 times as much output per hour as Mexican workers, then,
other things equal, it would be efficient to locate production facilities in:
A. the United States since the cost per unit of output will be higher.
B. the United States since the cost per unit of output will be lower.
C. Mexico since the cost per unit of output will be higher.
D. Mexico since the cost per unit of output will be lower.
Answer:
According to economic theory, which of the following types of discrimination is the
easiest to eliminate?
A. Discrimination based on individual characteristics that affect job performance.
B. Discrimination based on correctly perceived statistical characteristics of a group.
C. Discrimination that saves the firm money.
D. Discrimination based on individual characteristics that do not affect job
performance.
Answer:
Which of the following is primarily an observational science rather than a laboratory
science?
A. Medicine
B. Economics
C. Physics
D. Chemistry
Answer:
Which of the following is a requirement for a perfectly competitive market?
A. Buyers and sellers are price takers.
B. There are barriers to entry.
C. There are indivisible setup costs.
D. Sellers maximize sales.
Answer:
Refer to the graph shown depicting a monopolistically competitive firm. The marginal
cost curve is represented by curve:
A. A.
B. B.
C. C.
D. D.
Answer:
Suppose one Big Mac gives you a marginal utility of 500 and a second Big Mac gives
you a marginal utility of 200. The total utility of buying (and eating) two Big Macs is:
A. 200.
B. 300.
C. 500.
D. 700.
Answer:
Policy makers who listen to the academic economists from whom they ask advice:
A. always follow the economists’ policy recommendations.
B. do not always follow the economists’ policy recommendations.
C. never privately agree with the economists’ policy recommendations.
D. realize that the best way to get elected and reelected is to say constantly that all
choices have costs and benefits.
Answer:
To graphically demonstrate the principle of increasing marginal opportunity cost, the
production possibility curve must be:
A. flat.
B. straight.
C. bowed out.
D. bowed in.
Answer:
When you produce cars, it is enormously expensive to produce one car, but then the
costs per car decrease as more are produced. This would be an example of:
A. increasing marginal opportunity costs.
B. decreasing marginal opportunity costs.
C. constant marginal opportunity costs.
D. increasing returns to scale.
Answer:
Refer to the graph above. If labor supply shifts from S1 to S2, the market wage rate will:
A. increase from W0 to W1.
B. increase from W1 to W2.
C. decrease from W1 to W0.
D. decrease from W2 to W1.
Answer:
If output changes by 10 units while total costs rise by $500, marginal cost is
approximately:
A. $500.
B. $10.
C. $50.
D. $5,000.
Answer:
Quotas and tariffs can:
A. have the same effect on the price of a domestically produced good if they are set
appropriately.
B. never have the same effect on imports and import prices.
C. both increase international trade by the same amount if set appropriately.
D. yield the same amount of tax revenue if they are set appropriately.
Answer:
Refer to the graph shown. The graph exhibits economies of scale:
A. in region a.
B. in region b.
C. in region c.
D. over the entire range of output.
Answer:
The marginal cost of consuming another unit of a good:
A. must equal the marginal benefit or the unit will not be consumed.
B. must exceed the marginal benefit or the unit will not be consumed.
C. equals the increase in total cost when another unit is consumed.
D. equals the total cost of consuming all prior units.
Answer:
If government regulators want a natural monopolist to earn only zero economic profit,
they will set price equal to:
A. marginal cost (MC).
B. average variable cost (AVC).
C. average fixed cost (AFC).
D. average total cost (ATC).
Answer:
Refer to the following graph.
The perfectly competitive firm depicted is currently:
A. earning positive economic profit.
B. earning zero economic profit.
C. incurring a loss, but the loss is smaller than the firm’s total fixed cost.
D. incurring a loss that is larger than total fixed cost, and so the firm should shut down.
Answer:
Behavioral economists believe that people should smoke as many cigarettes as they
want.
Answer:
Perfect competition is more conducive to technological change than any of the other
market structures.
Answer:
In the 1945 ALCOA case, the court used company performance rather than the structure
of the market to determine whether the company was in violation of antitrust law.
Answer: