Consider the following information regarding a person’s decision to go to college:
college tuition is $20,000 per year, room and board is $10,000 per year, and books and
materials are $2,000 per year. Suppose that instead of going to college this person could
have earned $18,000 working in a store. An economist would calculate the cost of
going to college as
a. $20,000.
b. $30,000.
c. $32,000.
d. $50,000.
e. $18,000.
A factor that would reduce the ability of the Social Security system to maintain current
benefit levels with constant tax rates is
a. rapid real wage growth.
b. reduced population growth.
c. adoption of a “pay as you go” system.
d. a slowdown in inflation.
Zero economic profit means that the firm’s owners receive no compensation for their
investment.
a. True
b. False
An inward shift of the demand curve for a product causes outward shifts in the demand
curves for all the factors used to produce the product.
a. True
b. False
Economists are often perceived as disagreeing with each other. Is this the way things
really are?
a. No, economists agree on much more than is commonly supposed.
b. No, the problem is that some economists are smarter than others.
c. No, economists ‘stage” disagreements for public amusement.
d. Yes, economists rarely agree on much of anything.
e. Yes, economists are unable to analyze problems dispassionately.
Most innovations come from just a few large industries.
a. True
b. False
An employer would never operate on the upward-sloping part of an MRP curve because
a. he would not be maximizing profits.
b. he would be hiring workers at wages above MRP.
c. the number of workers is too large to get economies of scale.
d. he would then have too little capital per worker.
Union leaders who focus on increasing the size of their union will be aggressive in
demanding higher wages.
a. True
b. False
Table 22-4
Table 22-4 presents the demand and supply schedules for television sets in Japan and
the United States. If the United States and Japan trade with each other, what will happen
to the output of television sets in the United States?
a. TV production in the United States will fall by 10,000 units.
b. TV production in the United States will fall by 20,000 units.
c. TV production in the United States will fall by 30,000 units.
d. TV production in the United States will increase by 10,000 units.
On January 1, 2006, a consumer borrowed $10,000 for a term of one year at an interest
rate of 12 percent. How much principal and interest will the consumer pay back on
January 1, 2007?
a. $10,000
b. $1,200
c. $8,929
d. $11,200
Before the breakup of AT&T several years ago, profits on long-distance calls offset
losses on basic residential service. This practice is known as
a. abuse of monopolistic power.
b. cream skimming.
c. cross-subsidization.
d. the Ramsey rule.
Rising prices will discourage consumption and encourage conservation.
a. True
b. False
The supply of workers in an industry is influenced by the available working population
and the nonmonetary attractiveness of the job.
a. True
b. False
A partnership requires the agreement of most or all partners to any major decision.
a. True
b. False
Pure monopoly is able to exist because the firm’s product is better than the substitutes
that are available in the market.
a. True
b. False
Variability in exchange rates of currencies used in international trade
a. causes a complete breakdown of trade.
b. renders the theory of gains from trade null in practice.
c. brings with it a host of complications in trade policy.
d. has no impact on trade.
A firm will generally believe that if it increases its spending on R&D its competitors
will not follow, but if it decreases its spending they will follow.
a. True
b. False
Profit is maximized at the output at which marginal revenue exceeds marginal cost by
the greatest margin.
a. True
b. False