A change in consumer preferences will shift the budget line.
a. True
b. False
If a firm has increasing returns to scale at all levels of output, the
a. slope of its long-run total cost curve is always negative.
b. slopes of its short-run average cost curves are always negative.
c. slope of its long-run average cost curve is always negative.
d. slope of its production function is always negative.
The entry of new firms into an industry will very likely
a. shift the industry supply curve to the right.
b. cause the market price to fall.
c. reduce the profits of existing firms in the industry.
d. All of the above are correct.
As a competitive economy uses its stocks of a depletable resource,
a. the resource price will fall by ever greater amounts each year.
b. the resource price will rise by ever greater amounts each year.
c. the use of the resource will increase at an increasing rate.
d. resource use will drop to zero.
One of the consequences of preventing wages from falling in the European Union has
been growing unemployment.
a. True
b. False
When the average tax rate rises as income rises, this is known as progressive taxation.
a. True
b. False
The budget line facing a household includes information on
a. prices of two goods and household income.
b. household income and the price of money.
c. the price of one good and household income.
d. the price of two goods but no information on household income.
e. preferences of goods at various prices.
Ben quit his job as an economics professor to become a golf professional. He gave up
his salary ($40,000) and invested his retirement fund of $50,000 (which was earning 10
percent interest) in this venture. After all expenses, his net winnings (profit) were
$45,000. Ben’s economic profits were
a. $45,000.
b. $5,000.
c. $2,000.
d. zero.
Even though prices may change frequently, they can be expected to gravitate toward
equilibrium.
a. True
b. False
Inefficient allocation of resources occurs when
a. no one can be made better off without having someone else give up something.
b. it is possible to make some people better off without making others worse off.
c. society is operating at a point high on the production possibilities frontier.
d. society is operating at a point low on the production possibilities frontier.
More goods are available to the average American today than two hundred years ago,
but today an American has to work more hours to earn the money to purchase most
items.
a. True
b. False
Innovation is the act of putting an invention to practical use.
a. True
b. False
Bargain airline fares in which airlines charge varying rates to passengers for the same
flight and service is an example of
a. market penetration
b. transaction pricing.
c. collusion.
d. price discrimination.
Changes in the rate charged by electric power companies are subject to government
control because
a. the electric power companies are government enterprises.
b. consumer ignorance makes it impossible to know what rates are fair.
c. the electric power companies are monopolies of a service that is important to buyers.
d. cutthroat competition would probably occur if the government did not intervene.
There are only two people in the world (Adam and Eve) and only one good (apples).
Adam has four apples and a total utility in money terms from apple consumption of
$16; Eve has four apples and a total utility from apple consumption of $20. Which of
the following statements must be true?
a. Eve’s marginal utility from consuming her fourth apple must be greater than Adam’s
marginal utility from consuming his fourth apple.
b. The total utility of society will rise if Adam gives Eve one apple.
c. If Adam and Eve each always has a positive marginal utility from consuming apples,
the total utility of society can only be increased by an increase in the total number of
apples available for consumption.
d. Adam’s average utility from consuming apples is greater than Eve’s average utility
from consuming apples.
In the short-run, only a limited number of new firms may enter a perfectly competitive
market.
a. True
b. False
Under a proportional tax, the fraction of income paid in taxes
a. rises as income rises.
b. is unchanged as income changes.
c. falls as income rises.
d. is proportional to the change in income.
When bond prices rise,
a. stock prices must fall.
b. interest rates must fall.
c. interest rates must rise.
d. bankruptcies generally increase.
Voluntary programs for reducing pollution
a. have been more successful in the United States in encouraging recycling than any
other type of program.
b. are most appropriate when surveillance and enforcement are impractical.
c. work most reliably when voluntary reduction of pollution over a long period is
encouraged.
d. are enforced by legal authority.
What is the basic task that economists expect the market to carry out?
a. deal with the fundamental problem of scarcity
b. balance the government’s budget
c. lessen wants to the level of income available
d. meet all human wants
After a number of acquisitions, Air American controls 75 percent of the U.S. market. It
has been charged with “monopolizing” the U.S. air markets by the Justice Department.
In its defense, the airline would want to introduce evidence that
a. cross elasticities for air and rail travel were very high.
b. income elasticities for air and rail travel were very high.
c. price elasticity for air, rail, and auto travel were negative.
d. management always considered the public interest when setting prices.