Resources are all of the following EXCEPT:
A) unlimited and in abundance.
B) the things we use to produce goods and services.
C) limited in quantity and can be used in different ways.
D) scarce and therefore requiring choices to be made.
When you need to know how to get from San Francisco to New York, which of the
following details regarding reality are deemed not important and are usually assumed to
not be included in your map?
A) the temperature while you travel
B) the number of lanes on the freeway
C) the number of cars on the freeway
D) All of the above are deemed unimportant and are assumed as not included in your
map.
Public Broadcasting reads the names of local contributors on the air. This is likely to
________ the free-rider problem and lead to a ________ level of contribution to the
public good.
A) increase; smaller
B) increase; larger
C) reduce; smaller
D) reduce; larger
Recall the Application about the free-agent market for professional baseball
pitchers to answer the following question(s).
Recall the Application. Baseball players who switch teams are more likely to suffer
from injuries because the player’s ________ team has superior information concerning
the health of the player and, if they believe the player will be prone to injury in the
future, they ________ be willing to outbid another team.
A) new; will not
B) old; will not
C) new; will
D) old; will
Refer to Table 17.1. If the price of output is $2 per unit and the wage rate is $60,
________ workers should be hired.
Table 17.1
A) five
B) six
C) seven
D) eight
Recall the Application. Farmers in the city of Pu’er, China changing the acreage devoted
to coffee production illustrates the law of supply in that the ________ in the price of
coffee ________ the quantity supplied.
A) increase; increased
B) increase; decreased
C) decrease; increased
D) decrease; decreased
A pricing scheme under which a firm decreases its price in order to drive its rival out of
business is known as:
A) tie-in sales.
B) colluding.
C) predatory pricing.
D) bundling.
As price falls along the inelastic portion of a linear demand curve ________ decrease(s)
while ________ increase(s).
A) only price; quantity demanded, consumer surplus, and consumer expenditures
B) consumer surplus and price; quantity demanded and consumer expenditures
C) quantity demanded and price; consumer surplus and consumer expenditures
D) consumer expenditures and price; quantity demanded and consumer surplus
At a price of $1000, Dell Computer Co. is willing to sell 20 laptops and Compaq is
willing to sell 40 laptops. IBM will only sell laptops if the price is $1300 or higher. At
$1000, the market supply for laptops is:
A) 60.
B) 800.
C) 20.
D) 40.
According to this Application, because of the method used to determine if foreign
companies are selling products at lower prices in the United States than in their own
domestic markets, the Commerce Department:
A) has never found a foreign country guilty of dumping products.
B) virtually always finds that accused foreign countries are guilty of dumping their
products.
C) has a success rate of over 90 percent in accurately determining if countries are
dumping products.
D) is better equipped than its foreign counterparts in quickly and accurately identifying
countries that are dumping product.
Recall the Application. Suppose the price elasticity of demand for gasoline is 0.20 and
the price elasticity of supply for gasoline is 0.55. If supply increases by 20 percent, the
equilibrium price will decrease by:
A) 27 percent.
B) 57 percent.
C) 175 percent.
D) 375 percent.
Figure 14.2 represents the market for used cameras. Suppose buyers are willing to pay
$125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used
camera. If buyers believe that 50% of the used cameras in the market are lemons (low
quality), how much will pay for a used camera?
A) $25
B) $50
C) $75
D) $125
In which of the following situations should a firm increase its efforts to abate pollution?
A) The marginal benefit of abatement is less than its marginal cost.
B) The marginal benefit of abatement is greater than its marginal cost.
C) The marginal benefit of abatement is equal to its marginal cost.
D) none of the above
People who are the most willing to pay high interest rates for loans may have bad credit
ratings. This is an example of:
A) moral hazard.
B) an experience rating.
C) adverse selection.
D) a negative spillover.
Figure 12.8 depicts an advertising game between two stores. The outcome of the game
will be that:
A) both stores choose to advertise.
B) both stores choose not to advertise.
C) Store A advertises but Store B does not advertise.
D) Store B advertises but Store A does not advertise.
Refer to Figure 12.7. The numerical data show daily profits for each of the two firms
when they choose a specific pricing strategy. If both firms follow their individual
dominant strategy:
A) Omega will earn $300 daily profit and Zeta will earn $100 daily profit.
B) Omega will earn $100 daily profit and Zeta will earn $300 daily profit.
C) Both will earn $200 daily profit.
D) Both will earn $150 daily profit.
The efficient congestion tax is zero when:
A) everyone can travel safely at the posted speed limit.
B) there are no other cars on the road.
C) there are no traffic accidents on a stretch of highway.
D) carpool lanes are available.
________ is a cost that changes with the quantity produced by the firm and is incurred
by the firm in the short run.
A) Fixed cost
B) Economic cost
C) Variable cost
D) Average total cost
Suppose that there are two firms, each generating three tons of SO2. Suppose also that
the government has set a target abatement level of two tons. Under a policy of uniform
abatement with permits each firm would receive:
A) two non-transferable pollution permits.
B) two pollution permits which they could sell to each other.
C) one pollution permit with a value equal to that firm’s cost of abating one ton of SO2.
D) one pollution permit with a value equal to the market price for a pollution permit.
Figure 4.3 illustrates the demand for tacos. Assume tacos are a normal good. An
increase in income would bring about a movement from:
A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.
According to the application, country’s civil liberty includes which of the following?
A) freedom of expression
B) right to own property
C) freedom of religion
D) All of the above are part of a country’s civil liberty.
Which of the following industries is most likely to exhibit significant economies of
scale?
A) home building
B) vegetable farming
C) motorcycle production
D) electric power generation
Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the
same time, the quantity of liters of soda supplied increases from 200 to 210. The price
elasticity of supply for liters of soda (calculated using the initial value formula) is:
A) 0.1.
B) 0.5.
C) 10.
D) 20.
If, regardless of price, the quantity demanded is a constant amount, then the demand
curve is:
A) horizontal.
B) vertical.
C) upward sloping.
D) downward sloping.
Recall the Application. If it is not known whether the decrease in price of illegal drugs
is primarily due to a change in supply, a change in demand, or equal changes in both,
the equilibrium quantity of drugs:
A) will increase.
B) will decrease.
C) will not change.
D) may or may not change.
The relationship between the wage and the quantity of labor that a given worker is
willing to provide is called:
A) individual labor demand.
B) market labor demand.
C) individual labor supply.
D) market labor supply.
Figure 14.5 represents the market for used cars. Suppose buyers are willing to pay
$5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used
car. If buyers believe that 80% of used cameras in the market are lemons (low quality),
how many plums will be supplied in the market?
A) 30
B) 40
C) 70
D) 120
Suppose that the government imposes a maximum price on rental apartments and the
market price of apartments does not change. The most likely explanation is that:
A) the law is impossible to enforce.
B) apartment owners are withdrawing rental units from the market and forcing price up.
C) market forces are pushing rental rates up to avoid a shortage of apartments.
D) the maximum price set by the government was at or above the equilibrium price.
The problems of markets can be addressed by:
A) guaranteed price matching.
B) increasing the number of sellers in the market.
C) imposing price ceilings.
D) money back guarantees.
Conventional stores encourage shoppers to buy products by down-regulating neural
activity in the region of the brain responsible for the valuation of the ________ of a
product, and online retailers encourage shoppers to buy products by down-regulating
neural activity in the region of the brain responsible for the valuation of the ________
of a product.
A) benefit; benefit
B) benefit; cost
C) cost; benefit
D) cost; cost.
Who is associated with the following summary of the economic way of thinking: “The
theory of economics does not furnish a body of settled conclusions immediately
acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a
technique of thinking which helps its processer draw correct conclusions.”
A) John Maynard Keynes
B) Alfred Marshall
C) Adam Smith
D) President Harry Truman
Consider Figure 12.5. The dominant strategy in the prisoners’ dilemma is:
A) to confess for both players.
B) not to confess for both players.
C) to confess for player A but not to confess for player B.
D) to confess for player B but not to confess for player A.
Refer to Figure 12.8. If both firms follow their dominant strategies, Firm B will earn
profits equal to:
A) $500.
B) $700.
C) $200.
D) $100.