The notion of utilitarian justice is that
A) through income redistribution, the rich sacrifice a little and the poor gain a lot.
B) any change that makes some people better off without making anyone worse off
should be undertaken.
C) income should be distributed so that the well-being of the worse-off member of
society should be maximized.
D) income should be distributed according to an individual’s needs.
Figure 10.1
Refer to Figure 10.1. This firm is currently hiring 15 workers and paying a wage of $10.
This firm should
A) do nothing because it is maximizing profits.
B) increase employment to 16 workers to increase profits.
C) reduce employment to 14 workers to increase profits.
D) increase employment to 17 workers to increase profits.
A firm produces 5 units of output from the last dollar it spends on labor and 10 units
from the last dollar spent on capital. The firm should
A) employ more labor and less capital.
B) employ more capital and less labor.
C) employ more capital and labor.
D) employ less capital and labor.
A country’s trade is balanced when
A) its imports exceeds its exports.
B) its government expenditures are equal to its tax revenues.
C) its net exports equal to zero.
D) its net exports are greater than zero.
Table 3.2
Refer to Table 3.2. In this market there will be an excess demand of 500 cheeseburgers
at a price of
A) $5.
B) $6.
C) $7.
D) $8.
A dairy company, Farley Farm, has total costs of $10,000 and total variable costs of
$3,000. Farley Farm’s total fixed costs are
A) $0.
B) $7,000.
C) $13,000.
D) indeterminate because the firm’s output level is not known.
The slope of a horizontal line is
A) zero.
B) infinite.
C) continually changing.
D) negative.
A firm stands to gain by operating instead of shutting down as long as ________
sufficiently covers ________.
A) price; average variable cost
B) price; average fixed cost
C) total revenue; total fixed costs
D) operating profit; economic profit
Table 9.1
Refer to Table 9.1. In the long run, if cost conditions do not change, this firm will earn a
zero economic profit if price is
A) $20.
B) $30.
C) $40.
D) $56.
Table 3.1
Refer to Table 3.1. This market will be in equilibrium if the quantity of pizzas supplied
per month is
A) 700.
B) 750.
C) 800.
D) 900.
Opponents of income redistribution argue that
A) redistribution violates the proposition that “one is entitled to the fruits of one’s
efforts.”
B) property income is less just than labor income and thus redistribution of that income
is justified.
C) redistribution encourages too much competition.
D) Both A and C are correct.
Figure 4.3
Refer to Figure 4.3. The government setting the price of pencils at $0.50 would be an
example of an effective
A) price floor.
B) price ceiling.
C) market equilibrium.
D) price shortage.
Related to the Economics in Practice on page 217: According to the Economics in
Practice, firms where managers had more extensive training experienced
A) increasing wage rates.
B) a decrease in the marginal product of labor.
C) increased productivity.
D) a decrease in the marginal revenue product of labor.
Income tax studies show that its burden as a percentage of income rises as income
A) remains the same.
B) decreases.
C) rises.
D) falls to zero.
Economists refer to things that have already been produced that are in turn used to
produce other goods and services as
A) land.
B) labor.
C) entrepreneurship.
D) capital.
Tony’s Lawn Service uses only one variable input, fertilizer. The firm’s demand curve
for fertilizer in the short run is the input’s
A) total product curve.
B) marginal product curve.
C) marginal revenue product curve.
D) total cost curve.
Related to the Economics in Practice on page 88: Which of the following best explains
why the people who wait for hours to acquire tickets to free performances earn less on
average than the people who actually see those performances?
A) The value of time spent waiting in line is less for people who earn less money.
B) People who earn more money are less likely to be aware of the opportunity to
acquire free tickets.
C) High-wage individuals are more likely to have schedule conflicts that prevent them
from using their tickets.
D) People interested in live performances are likely to have access to other forms of
entertainment, such as television and radio.
Figure 7.2
Refer to Figure 7.2. The marginal product of the first worker is ________ lawns
mowed.
A) 3
B) 4
C) 5
D) 11
Suppose that Greece and Portugal are both engaged in the production of grapes and
figs, and that Greece has an absolute advantage in the production of both goods. If
Portugal has a lower opportunity cost for producing figs, then
A) Portugal has a comparative advantage in the production of figs, but it is outweighed
by Portugal’s absolute advantage in fig production.
B) Greece has a comparative advantage in the production of both goods.
C) Portugal has a comparative advantage in fig production, but there will be no gains
from specialization and trade.
D) Portugal has a comparative advantage in the production of figs, and specialization
and trade between the two countries can be mutually beneficial.
The United States imports televisions from Japan and Japan imports computer chips
from the United States. If the theory of comparative advantage guides trade between the
two countries, it must be true that
A) the opportunity cost of producing televisions in Japan is higher than that in the
United States.
B) the opportunity cost of producing computer chips in the United States is higher than
that in Japan.
C) the United States has comparative advantage in producing computer chips.
D) the United States has comparative advantage in producing televisions.
Table 16.2
Refer to Table 16.2. This glass-recycling firm is perfectly competitive and is forced to
take damage costs into account. If the market price of the product is $50 a ton and the
firm behaves as a profit-maximizer, then total damage will be
A) $0.
B) $40.
C) $50.
D) $90.
When there are fewer substitutes for a product, the ________ for the product is
________.
A) demand; less price elastic
B) demand; more price elastic
C) income elasticity; greater
D) income elasticity; smaller
Using graphs, explain the effect of an increase in the price of cheese on the supply of
cheese and the supply of pizza.
If there is an increase in industry supply while the industry demand curve remains the
same, then an individual firm in a perfectly competitive industry currently earning
positive profits will see its profits ________.
A) increase
B) not change
C) decrease
D) impossible to determine
The government’s role in a developing country is important during the country’s
development process for all of the following reasons EXCEPT
A) building social overhead capital cannot be taken on by the private sector.
B) building infrastructure is a huge project that only the government can undertake.
C) many social projects are associated with the free-rider problem, which minimizes the
rate of return to the private sector.
D) the government is the only institution with a vested interest in a country’s
development.
Figure 9.1
Refer to Figure 9.1. This farmer would earn a zero economic profit if price was
A) $7.
B) $9.
C) $10.
D) $11.
Table 8.2
Refer to Table 8.2. Assume that Danica’s Earrings is producing in a perfectly
competitive market and the market price for earrings is $30. To maximize profits,
Danica should produce ________ pairs of earrings.
A) two
B) three
C) four
D) five
Which of the following would be classified as an external cost?
A) As more firms began hiring computer programmers, the salaries of computer
programmers increased, and therefore the firm’s cost of production increased.
B) A private firm will not provide national defense, as it is impossible to confine the
benefits to only those individuals who have paid for it.
C) You are not able to study at night because there is so much noise coming from the
dorm room next to yours.
D) When you purchase a prescription drug, you are not made fully aware of all the
possible side effects that may result from taking the drug.
Table 14.2
B’s Strategy
Refer to Table 14.2. If both firms follow a maximin strategy, the equilibrium in the
game is ________.
A) (Advertise, Advertise)
B) (Don’t Advertise, Don’t Advertise)
C) (Don’t Advertise, Advertise)
D) (Advertise, Don’t Advertise)
Compared to traditional bank loans, microfinance loans
A) are much larger.
B) require collateral.
C) are made more frequently to women than to men.
D) have repayments that begin at a much later date.
Assuming that leisure is a normal good, if an individual’s labor supply curve is upward
sloping, then the
A) income effect outweighs the substitution effect at higher wages.
B) substitution effect outweighs the income effect at higher wages.
C) income effect and the substitution effects are equal.
D) income effect is zero.
A family that earns $20,000 a year pays $200 a year in clothing taxes. A family that
earns $40,000 a year pays $800 a year in clothing taxes. The clothing tax is a ________
tax.
A) progressive
B) regressive
C) proportional
D) benefits-received
If total revenue exceeds the total cost of production, a firm
A) earns a profit.
B) suffers a loss.
C) breaks even.
D) shuts down.
In longrun equilibrium for a monopolistically competitive firm, the firm’s demand curve
is ________ its average total cost curve.
A) above
B) below
C) just tangent to
D) either above or below
Figure 9.7
Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a
substitute for wheat) falls, then demand for wheat will shift to ________. This will
________ the equilibrium price of wheat, and individual profit maximizing firms will
produce ________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 13
C) D3; decrease; 10
D) D1; decrease; 0