Which of the following observations concerning labor cost patterns over the last
century is true?
a. Average real wages started rising after 1973.
b. Hourly compensation rates have fallen dramatically.
c. Compensation growth slowed markedly.
d. Average hours worked per week have increased by almost 50 percent.
A total cost curve shows the largest amount of a product a firm can produce with a
minimum cost.
a. True
b. False
The mechanism of supply and demand is
a. a fundamental tool in both microeconomics and macroeconomics.
b. the only real “law” of economics.
c. a fundamental tool only in microeconomics.
d. a fundamental tool only in macroeconomics.
Business firms are prohibited by law from borrowing money from banks.
a. True
b. False
The most important advantages of bigness will be found in industries that show
increasing returns to scale.
a. True
b. False
An increase in income produces a parallel, outward shift in the budget line.
a. True
b. False
Figure 4-13
The drug BGH (bovine growth hormone) dramatically increases the milk output of
dairy cows. Farmers in Wisconsin, a big dairy state, vigorously oppose licensing the
drug, fearing that excess supply and a consumer reaction on the purity of food issue will
put many of them out of business. Which graph in Figure 4-13 best illustrates the
farmers’ fears?
a. 1
b. 2
c. 3
d. 4
Owners of a corporation have limited liability for the debts of the business.
a. True
b. False
In 1971, a bank worker could process 265 checks in 1 hour. Currently, computers with
built-in reader-sorter processing capacity have pushed that number above 100,000
checks per hour. Economists describe this type of activity as
a. exploitation of labor.
b. an increase in labor productivity.
c. speed-up.
d. comparative advantage.
e. mutual gains from voluntary trade.
Most American workers
a. are employed in the goods-producing sector.
b. are employed by government.
c. are employed in the service-producing sector.
d. are employed in the agricultural sector.
Bigness, or large firms, may benefit consumers in which of the following ways?
a. Larger firms usually charge lower prices than smaller firms.
b. Larger firms with monopoly power definitely have greater incentive to be efficient
and innovative.
c. Larger firms may take advantage of economies of scale and scope.
d. Larger firms are more responsive to consumers’ desires.
Firms have the option of maximizing sales revenue or maximizing profits. If a firm
chooses to maximize sales, then it will produce
a. more output and charge a lower price.
b. the same output and charge a lower price.
c. less output and charge a higher price.
d. less output and charge a lower price.
Lana spent $5 to see a movie. We know
a. the movie was worth 500 utils.
b. Lana’s total utility from movies was $5.
c. the movie was worth at least $5 worth of other goods.
d. the movie increased marginal utility.
Firms need to know the shape of a demand curve to use marginal analysis.
a. True
b. False
The elasticity of a straight-line demand curve is the same as its slope.
a. True
b. False
A recent study on enrollment at a liberal arts college concluded that demand elasticity is
0,91 The administration is considering a tuition increase to help balance the budget. The
revenue-maximizing decision is to
a. decrease tuition, which should boost enrollment enough to balance the budget.
b. decrease tuition, which would bring in more revenue.
c. leave tuition as is-an increase would not help balance the budget.
d. increase tuition, which would bring in more revenue.
Redistribution programs that reduce poverty and income inequality
a. always increase GDP.
b. always decrease GDP.
c. usually increase GDP.
d. usually decrease GDP.
A demand curve to remain unit elastic along its entire length should
a. cross the X axis.
b. touch the X axis but not the Y axis.
c. never touch either the X or the Y axis.
d. touch the Y axis but not the X axis.
Which of the following functions is not performed by prices in a free market?
a. guiding the allocation of resources
b. conveying information about the marginal cost of production
c. making the distribution of income more equitable
d. replacing the need for governmental supervision of production
One of the great strengths of the market system is the way it acts as an engine of
economic growth and innovation.
a. True
b. False
The slope of a curved line at a particular point is
a. always greater than the slope of a straight line at the same point.
b. always smaller than the slope of a straight line at the same point.
c. defined as the slope of the straight line representing the average values for the entire
curve.
d. defined as the slope of the straight line that is tangent to the curve at that point.
Firms violating antitrust laws are likely to be sued by the federal government, but not
by rival firms.
a. True
b. False
The U.S. government spent over $3,6 trillion in budget year 2010
a. True
b. False
Emissions permits allow polluters to pay for the right to pollute a specified amount.
a. True
b. False
The supply of public goods must be left to government and nonprofit institutions. Why?
Discuss the criticisms leveled against the Aid to Families with Dependent Children
program.
It has been found that people die at a much higher rate in hospitals than in most other
environments, leading some to conclude that hospitals cause death. What is the problem
with this reasoning?
An investor is trying to decide whether to put his funds into stocks or bonds. He expects
rising interest rates over the next year and higher inflation. Your advice?
For each pair of goods, explain which is more elastic: toothpicks vs. cars; electricity vs.
yachts; IBM computers vs. Apple computers.
Are national forests public goods? Explain.
Explain how the free-market mechanism adjusts prices so that resource allocation is
economically efficient.
Suppose a monopolist can charge different prices to different customers, such as doctors
charging different prices depending on whether the patient is insured. How will profits
and marginal revenue of such a price-discriminating monopolist compare to profits and
MR of an ordinary monopolist who must charge all patients the same fee?
The following table depicts the production relationship between units of labor and
output of pepper on Pietrov’s Pepper Farm.
Graphically show the three zones of production corresponding to increasing,
decreasing, and negative marginal product, noting the point of diminishing returns.