A firm is operating with an optimal combination of inputs. Suddenly the price of one
input rises. The firm should
a. buy less of that input and more of the other input.
b. change its input mix so that the marginal physical product of the input whose price
has risen falls and the marginal physical product of the other input rises.
c. buy less of whichever input now has the highest money price and more of the other
input.
d. reduce its output.
Cost minimization is the process of making optimal use of all of the inputs whose
quantities are
a. set in the short run.
b. set in the intermediate run.
c. set in the long run.
d. variable in the short and long run.
The percentage of work time lost due to strikes in the United States has been increasing
over time.
a. True
b. False
The “invisible hand” refers to the control that government must exercise over a market
economy.
a. True
b. False
The concentration ratio of industry is a measure relating to the proportion of the
industry’s total output that is produced by a small number of firms.
a. True
b. False
If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10
percent,
a. demand is elastic.
b. demand is inelastic.
c. elasticity of demand is unitary.
d. None of the above is correct.
Which of the following taxes tend to make income distribution in the United States
more equal?
a. sales (i.e., excise) taxes
b. personal income taxes
c. payroll taxes
d. All of the above are correct.
“Assume that all individuals have perfect information about prices now and in the
future, that they have identical tastes, that all markets are competitive, and that there is
no government.” This statement is indicative of how economists
a. apply the law of supply and demand.
b. employ marginal analysis.
c. are prevented from getting correct answers.
d. abstract for analytic purposes.
e. use realistic assumptions to develop theory.
Which of the following observations is true of the principle of comparative advantage?
a. It arises from the absolute cost advantage.
b. It helps determine most efficient patterns of production.
c. It was advanced by Adam Smith.
d. It means producing a good using smaller quantities of resources than others.
If you must determine the long-run equilibrium output of a perfectly competitive firm
and you are permitted to see only one curve, which of the following curves is most
helpful?
a. demand
b. marginal cost
c. average cost
d. average fixed cost
Explain how each of the following industries practices price discrimination:
a. movie theaters
b. airlines
c. auto dealers
d. U.S. Postal Service
In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the
dollar value of her sales remained constant, that indicates
a. old customers bought no more books.
b. no new customers bought books.
c. the quantity of books sold increased 20 percent.
d. the demand curve is vertical.
Double taxation is a problem for corporations.
a. True
b. False
The United States has the largest economy in the world because
a. it has the most land to work with.
b. it has a large population.
c. American workers are very productive.
d. both b and c are correct.
Figure 11-9
In Figure 11-9, how much more than the short-run competitive price will the
profit-maximizing monopolist charge?
a. $1
b. $2
c. $3
d. $10
Regarding government manipulation of the interest rate, all of these statements are
correct, except:
a. To address business fluctuations, governments may reduce interest rates to induce
people to borrow.
b. Such manipulations may give little thought to the effects on resource allocation
between present and future.
c. Economists agree with the concept of using of interest rates to allocate resources
among different time periods.
d. Generally, the price system reflects public preference between present and future
resource allocation.