Which of the following characteristics of a PPF indicates that tradeoffs must be made?
a. the downward slope
b. the upward slope
c. the constant slope
d. the curvature
A decrease in price of a certain good most likely will lead to
a. an increase in quantity demanded and an increase in demand.
b. an increase in quantity demanded but no change in demand.
c. an increase in demand but no change in quantity demanded.
d. no change in demand and no change in quantity demanded.
It is possible to represent three dimensions on a two-dimensional graph by using
a. a contour map.
b. a razor blade.
c. curved lines.
d. all of the above.
Carefully define the following terms and explain their importance to the study of
economics.
a. specialization
b. absolute advantage
c. comparative advantage
d. quota
e. trade adjustment assistance
Economies of scale is another term for
a. increasing returns to scale.
b. constant returns to scale.
c. increasing marginal physical productivity.
d. decreasing returns to scale.
The optimal purchase rule is stated as
a. TU = MU.
b. MU = P.
c. TU = P.
d. MU = 0.
A minority of American women work outside of the home.
a. True
b. False
An increase in fixed cost will, in the short run, alter the industry’s output of
a. both a monopolist and a competitive industry.
b. only a monopolist.
c. only a competitive industry.
d. neither a monopolist nor a competitive industry.
For most goods and most people, marginal utility probably
a. continues to increase as larger quantities are purchased.
b. plummets after the first few units but soon begins to rise.
c. declines as consumption increases.
d. is negative after the first unit of a good is purchased.
e. is positive and rising for most goods.
In the event of a detrimental externality which affects the public interest, government
action is the only solution.
a. True
b. False
Which of the following statements is not true in a perfectly competitive industry in
long-run equilibrium?
a. A profit-maximizing firm may produce any output level at which P < LRAC.
b. Every firm produces at an output level at which MC = LRAC.
c. There is no entry or exit from the industry.
d. No firm earns an economic profit.
A society must make three sorts of decision: what goods to produce, how to produce
them, and how to distribute them.
a. True
b. False
Labor productivity refers to the total amount of output a worker produces in some
period of time (an hour, a week, a month, a year).
a. True
b. False
Monopoly firms may lead to higher costs than perfectly competitive firms.
a. True
b. False
If the marginal net utility of beer is a positive number, the consumer should buy more
beer in order to maximize utility.
a. True
b. False
The production possibilities curve illustrates the basic principle that
a. an economy’s capacity to produce increases in proportion to its population.
b. if all resources of an economy are in use, more of one good can be produced only if
less of another is produced.
c. an economy will automatically seek that output at which all of its resources are
employed.
d. no opportunity cost exists in production.
Table 22-2
Using the data from Table 22-2, suppose England transfers 2 units of labor from wine to
cloth and Portugal transfers 1 unit from cloth to wine. The combined production of
wine and cloth will be increased by
a. 16 wine, 8 cloth.
b. 16 wine, 16 cloth.
c. 12 wine, 12 cloth.
d. 8 wine, 16 cloth.
Carefully define the following terms and explain their importance to the study of
economics.
a. resources
b. rational decision
c. scarcity
d. opportunity cost
When factor markets are competitive, it always pays a profit-maximizing firm to
a. use more of the factor.
b. bid very low prices for inputs.
c. reduce the use of all inputs.
d. use that quantity of input that makes MRP equal to the price of the input.
The government of Economica announces that it will purchase its farmers’ surplus of
milk. From this announcement, you can infer that Economica has a
a. free market for milk.
b. price ceiling above the equilibrium price for milk.
c. price floor above the equilibrium price for milk.
d. price floor below the equilibrium price for milk.