In general, all markets equilibrate at the same speed.
a. True
b. False
Which of the following statements is true?
a. In the short run, there are no fixed costs, only variable costs.
b. In the short run, there are fixed and variable costs, but in the long run there are only
fixed costs.
c. In the short run, there are fixed and variable costs, but fixed costs are the only costs a
firm is concerned with.
d. In the long run, there are no costs, fixed or variable.
e. none of the above
In all cases, macroeconomics deals with
a. what is.
b. what should be.
c. relatively small units in the economy.
d. the entire economy.
If the absolute price of a computer is $500 and the relative price of a dining room table
is 3 computers, it follows that the absolute price of a dining room table is
a. $167.
b. $750.
c. $3,000.
d. $30,000.
e. none of the above
Exhibit 31-3
Suppose that Firms A, B, and C are the only polluters in the state and that each emits 4
tons of pollution into the atmosphere. To cut the level of pollution in half, the
government mandates system whereby each firm must reduce its pollution level by
one-half. The total cost of complying with the mandate is
a. $433.
b. $1,540.
c. $2,750.
d. $8,570.
e. $11,650.
Exhibit 31-2
If the exhibit represents a positive externality situation, the net social benefit of
expanding output from Q1 to Q2 is the area of
a. Q1ABQ2.
b. Q1AEQ2.
c. CBA.
d. ABE.
Advocates of a fixed exchange rate system argue that fixed exchange rates promote
international trade.
a. True
b. False
Lawrence earns $X in his current job. If he weren’t working at his current job, he would
be working at another job earning $Y. It follows that
a. Lawrence is not earning any economic rent in his current job.
b. Lawrence is earning economic rent in his current job if $X – $Y is a positive dollar
amount.
c. Lawrence is earning economic rent in his current job if $X – $Y is a negative dollar
amount.
d. Lawrence is earning pure economic rent in his current job.
e. Lawrence is definitely earning some economic rent in his current job.
Exhibit 28-5
In case (3), with a rise in the wage rate from W1 to W2, the wage bill will rise if
a. Q1 x W3 > Q2 x W1.
b. (Q3 – Q2) x W3 > Q1 x W1.
c. (W2-W1) x Q2 > (Q1 – Q2) x W1.
d. (W2 – W3) x Q2 > (W2 – W3) x (Q3 – Q2).
Exhibit 20-6
Let S1 be the supply curve of a producer. If S2 is the supply curve of the same producer
after the government imposes a per-unit tax, the share of the tax paid by the producer as
compared to the share of the tax paid by consumers will be
a. greater if D1 is the demand curve facing the producer.
b. greater if D2 is the demand curve facing the producer.
c. the same regardless of which demand curve the firm faces.
d. Any of the above, depending on the type of good the tax is imposed on.
In a very popular movie, the principal character wore aviator sunglasses that were given
to the movie studio by the producer of the sunglasses. The sunglasses suddenly became
very popular, and the sunglasses producer earned significant profits. Which of the
following theories on the source of profits discussed in the textbook best describes the
reason behind this success?
a. Uncertainty is a source of profits.
b. Profit is a reward for alertness to arbitrage opportunities.
c. Profit is the return to the entrepreneur as innovator.
d. Profit is a reward for waiting long enough for consumers to respond to your product.
The purchasing power parity theory predicts better in the __________ run, and when
there __________ in inflation rates across countries.
a. long; is little difference
b. short; are large differences
c. long; are large differences
d. short; is little difference
As a firm produces more units of a good, its
a. fixed costs remain constant in the short run and its variable costs rise.
b. variable costs decline in the short run and its fixed costs rise.
c. fixed and variable costs remain constant in the short run.
d. variable costs remain constant in the short run and its fixed costs fall.
e. none of the above
Under an emission tax, polluters ________ what price they have to pay to pollute,
__________________________ how much pollution will be generated.
a. know; and government knows
b. don’t know; and government doesn’t know
c. know; but government doesn’t know
d. don’t know; but government knows
If the government grants tax credits to first-time homebuyers, the supply of houses
would increase and the price of housing would fall.
a. True
b. False
If the owners of a firm earn accounting profit, it follows that
a. they will earn economic profit, too.
b. their explicit costs are greater than their implicit costs.
c. their implicit costs are greater than their explicit costs.
d. they will not earn economic profit.
e. none of the above
In long-run equilibrium, a monopolistic competitive firm will most likely produce a
level of output for which price equals average total cost.
a. True
b. False
Which of the following situations would prompt individuals to try to form a team
(firm), according to Alchian and Demsetz.
a. Jones, Smith, and Brown together produce 100 units of good X each day working
alone and 90 units of good X each day working together.
b. Jones, Smith, and Brown together produce 100 units of good X each day working
alone and 120 units of good X each day working together.
c. Jones, Smith, and Brown together produce 100 units of good X each day working
alone and 100 units of good X each day working together.
d. Jones produces more working alone than Smith or Brown produce working alone.
e. Jones produces more working as a member of a team than Smith or Brown produce
working as a member of a team.
Which of the following is an example of a negative externality?
a. Bad weather reduces the size of the wheat crop.
b. A reduction in the size of the wheat crop causes the income of wheat farmers to fall.
c. Smoking harms the health of nonsmokers who are nearby.
d. Smoking harms the health of the smoker.
e. all of the above
As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are
a. substitutes.
b. normal goods.
c. complements.
d. inferior goods.
e. none of the above