The supply of loanable funds curve is
a. upward sloping because fewer people are persuaded to forgo current consumption as
the interest rate rises
b. downward sloping, showing that more investment will be undertaken as inflation
decreases
c. upward sloping because the opportunity cost of goods and services that must be
forgone increases
d. downward sloping, showing that as more funds are made available, the risk cost of
loaning funds decreases
e. usually horizontal
The present value of receiving $200 one year from now when the prevailing rate of
interest is 8 percent is less than the present value of receiving $200 two years from
today when the prevailing rate of interest is 8%
a. True
b. False
Exhibit 5-15
Which of the demand curves in Exhibit 5-15 is unit elastic?
a. the curve in graph a
b. the curve in graph b
c. the curve in graph c
d. the curve in graph d
e. the curve in graph e
Which of the following statements concerning speculators is true?
a. There is no risk involved in speculative activity.
b. They simultaneously buy and sell a currency in different markets.
c. They hope to profit by trading a currency at a different exchange rate later.
d. Their actions do not affect exchange rates.
e. Their actions are exactly like those of arbitrageurs.
Rents represent earnings that
a. exceed marginal cost
b. are less than marginal revenue product
c. are less than what producers would require to supply products
d. exceed opportunity revenue
e. exceed opportunity cost
The marginal cost curve intersects the average total cost curve (ATC)
a. at the ATC’s minimum point
b. only when the ATC is sloping upward
c. at the ATC’s maximum point
d. only when the ATC is sloping downward
e. when the ATC intersects the fixed cost curve
Exhibit 4-15
Refer to exhibit 4-15. A decrease in the price of baby formula will cause which of the
following to happen?
a. supply shift from S2 to S1
b. movement from c to d on supply curve S2
c. supply shift from S1 to S2
d. movement from b to a on supply curve S1
e. none of the above
Market structure
a. has no influence on a firm’s decision making
b. applies only to industries regulated by the government
c. is determined entirely by demand conditions in the industry
d. influences the forms of competition among firms
e. does not affect product price or quantity of output
Differences in resource endowments are differences in
a. tariffs charged by each country
b. consumption patterns across nations
c. production patterns across nations
d. the quantity, but not the quality, of resources available in different nations
e. the quality and quantity of resources available in different nations
Suppose Enid could increase her total utility by purchasing one more book and one less
video rental. Which of the following is true?
a. The marginal utility of video rentals exceeds the marginal utility of books.
b. The marginal utility of books exceeds the marginal utility of video rentals.
c. The marginal utility of video rentals is negative.
d. The marginal utility per dollar spent on books exceeds that of video rentals.
e. Total utility is at a maximum.
Average revenue for a perfectly competitive firm is equal to
a. price times output
b. marginal revenue
c. total revenue/marginal revenue
d. output/total revenue
e. zero
The law of diminishing marginal utility may be illustrated by a person
a. buying additional goods after getting a pay raise
b. eating more twinkies but enjoying them less
c. giving some of income to a needy person
d. who spends more hours studying than do his fellow students
e. buying goods so long as their marginal utility is greater than zero
Which of the following is the best example of the ownership of the resource called land
a. John Smith’s ownership of 10 shares of a manufacturer of farm tractors
b. Pogo O”Reilly’s ownership of 10 shares of a natural gas extraction company
c. Helen Restock’s ownership of a $10,000 savings bond
d. Abe Hawthorne’s college degree in marketing
e. Ann Stump’s creative, risk-taking personality
The automobile, breakfast cereal, and tobacco industries are examples of
a. monopolistic competition
b. oligopoly
c. perfect competition
d. monopoly
e. monopsony
The dominant-strategy solution implies that each firm
a. ignores the reactions of competitors
b. colludes with competitors to maximize industry profits
c. ignores the decisions of the other firms
d. takes all potential bits of information into consideration before making a decision
e. selects the optimal solution to a game
Which of the following would shift the supply curve for a product to the right?
a. an increase in the price of a resource used in the good’s production
b. the expectation of a higher price in the near future
c. an increase in the price of the product
d. an increase in the price of an alternative good
e. an improvement in the technology for producing the good
Exhibit 5-1
Use the information in Exhibit 5-1 to calculate the price elasticity of demand for Good
A.
a. -5/2
b. -11/3
c. -3/10
d. -10/3
e. -19/11
Exhibit 6-30
Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact
disks. What is the current price of books?
a. $1
b. $5
c. $10
d. $60
e. unable to determine
If demand is more elastic than supply is, the
a. smaller the portion of the tax that will be paid by producers
b. larger the portion of the tax that will be paid by consumers
c. more likely it is that the tax will be spread equally between producers and consumers
d. more likely it will be subject to tax evasion by those in the underground economy
e. larger the portion of the tax that will be paid by producers
Which of the following accounts for the largest percentage of spending by households
in the United States?
a. durable goods
b. nondurable goods
c. services
d. insurance payments
e. underground activities (e.g., illegal activities)
Most economists consider a theory a good one if it predicts well.
a. True
b. False
In the loanable funds market,
a. savers are suppliers of loanable funds, and borrowers are demanders of loanable
funds
b. the supply curve slopes downward, and the demand curve slopes upward
c. the supply curve reflects the negative relation between the market rate of interest and
the quantity of savings
d. households play the role of financial intermediaries
e. banks pay a higher interest rate on consumer savings than they could earn by lending
these funds out
An indication that the economy is in recession, e.g., a rise in the number of used
clothing stores for babies, suggests that
a. used clothes for babies are a necessity
b. used clothes for babies are an inferior good
c. used clothes for babies are a normal good
d. new clothes for babies are a luxury
e. used clothes for babies have price-elastic demand
Exhibit 4-15
Refer to exhibit 4-15. The development of more efficient production technologies for
baby formula will cause which of the following to happen?
a. supply shift from S1 to S2
b. movement from a to b on supply curve S1
c. supply shift from S2 to S1
d. movement from c to d on supply curve S2
e. movement from b to a on supply curve S1
The value of a country’s imports cannot exceed the value of its exports.
a. True
b. False
If a surplus exists in the market for swimwear, an economist would predict that
a. the price of swimwear will rise
b. producers will increase the production of swimwear
c. the supply of swimwear will increase
d. the price of swimwear at retail outlets will begin to fall
e. buyers will react to the surplus by increasing their demand for swimwear
Exhibit 11-7
In Exhibit 11-7, the marginal revenue product of the third machine is
a. 3
b. 15
c. $3
d. $9
e. $45
Exhibit 12-3
In Exhibit 12-3, which of the following is true when the wage rate increases from $9 to
$11?
a. The substitution effect will cause the person to work more hours.
b. The income effect will cause the person to work more hours.
c. The substitution effect will cause the person to work fewer hours.
d. The income effect will cause the person to work the same number of hours.
e. The substitution effect will cause the person to work the same number of hours.
A regulated natural monopoly that must set price equal to average cost will
a. suffer an economic loss
b. earn a net economic profit
c. earn a normal profit
d. earn so little that it will close in the long run
e. earn no profits of any kind
In an oligopoly, the demand curve facing an individual firm depends upon
a. the behavior of competing firms
b. the shape of the firm’s average total cost curve
c. the shape of the firm’s marginal cost curve
d. the firm’s supply curve
e. the shape of the firm’s average variable cost curve
Which of the following does notcharacterize a perfectly competitive firm that has shut
down in the short run?
a. total revenue equals zero
b. variable costs equal zero
c. the firm suffers a loss
d. fixed cost is positive
e. fixed cost is zero
The demand curve facing a monopolist
a. is kinked at the market price
b. is perfectly elastic
c. lies above its marginal revenue curve
d. lies below its marginal revenue curve
e. is the same as its marginal revenue curve