The loanable funds market brings together savers and borrowers to determine the
a. marginal rate of return on investment
b. rate of time preference
c. market rate of interest
d. marginal resource cost of investment
e. marginal revenue product of investment
Data show that the poorest U.S. demographic group is
a. the elderly because Social Security payments have not kept pace with inflation
b. the elderly because they have no steady income
c. the elderly because poverty increases with age
d. households headed by someone under 18 years of age
e. households headed by someone between 40 and 50 years old
Exhibit 7-1
Sally owns a small business that she operates in a small building she owns. Given the
information in Exhibit 7-1, Sally’s economic profit is
a. $80,000
b. $50,000
c. $65,000
d. $35,000
e. $24,000
There is a tremendous range in productive performance around the world.
a. True
b. False
In recent years, redistribution has been the fastest growing category of federal
government outlays.
a. True
b. False
Which of the following is true at each output level for a perfectly competitive firm?
a. MC = AVC = ATC
b. MR = MC
c. P > AVC
d. AR = MR = P
e. MR = AR = MC
The minimum wage
a. is an example of a government-created barrier to entry
b. was designed as a way to increase employment of low-skilled workers
c. is an attempt to raise the incomes of low-income workers
d. is an example of a price ceiling
e. is an example of a derived demand
Compared to a perfectly competitive market, a monopoly tends to produce
a. more output and charge a higher price
b. the same amount of output, but charge a higher price
c. less output and charge a higher price
d. less output and charge the same price
e. less output and charge a lower price
The funds to pay for police protection are usually raised through taxation because
a. police protection would be hard to provide exclusively to those who voluntarily pay
for it
b. people would not voluntarily pay salaries to officials who might arrest them
c. police protection is a basic necessity
d. goods financed through taxation can be guaranteed to all who pay for it
e. the government believes that those who receive the benefits from the service should
pay for it
Vertical integration has no effect on the internal organization of a firm; it only affects
the outside markets.
a. True
b. False
Exhibit 4-9
Exhibit 4-9 shows a demand curve for dog ownership. If your local government passes
an anti-dog-litter law that raises the personal cost of owning a dog from C to C”, the
quantity of dogs demanded will
a. drop to zero
b. stay the same
c. decrease
d. increase
e. The answer can only be determined with numbers to analyze.
If a perfectly competitive firm charges the market price of $14 per unit,
a. its marginal revenue is $14, and its average revenue is less than $14 per unit
b. it will sell no output
c. its average revenue is $14, and its marginal revenue is less than $14 per unit
d. its average revenue is $14, and its marginal revenue is $14
e. its average and marginal revenue are $14 only for the first unit sold
Along a bowed-out production possibilities frontier, as more of one good is produced,
a. the opportunity cost of producing that good remains constant
b. the opportunity cost of producing that good decreases
c. efficiency decreases
d. the opportunity cost of producing both goods must remain constant
e. technology remains constant
According to the convergence theory,
a. less-developed countries should grow faster than advanced ones because of the
ability to copy new technology
b. the growth rates of all countries converge because in the long run, all resources are
alike
c. human capital differences can never be made up
d. GDP and productivity growth rates should converge over time
e. the impact of basic and applied research should converge over time
The United States recycles a greater portion of its garbage than Japan does.
a. True
b. False
Differences in stages of development among countries are reflected in a number of
ways besides per capita income.
a. True
b. False
Which of the following is not a characteristic of perfect competition?
a. A commodity product
b. A large number of independently acting sellers
c. Freedom of entry
d. The existence of externalities
e. Each firm is a price taker
If supply decreases along a given demand curve,
a. an excess quantity demanded will be created, increasing the equilibrium price and
causing equilibrium quantity to fall
b. an excess quantity supplied will be created, lowering the equilibrium price and
causing equilibrium quantity to rise
c. an excess quantity demanded will be created, raising the equilibrium price and
quantity
d. an excess quantity supplied will be created, lowering the equilibrium price and
quantity
e. price will fall, shifting the demand curve outward, raising the equilibrium quantity
Exhibit 7-14 Total Cost Curve
In Exhibit 7-14, what is fixed cost of producing output?
a. $0
b. $3
c. $10
d. $46
e. cannot be determined from the total cost curve
Which of the following reflects diseconomies of scale?
a. Marginal product decreases as output increases.
b. Short-run marginal cost increases as output increases.
c. Long-run marginal cost increases as output increases.
d. Short-run average cost increases as output increases.
e. As output doubles, long-run total cost more than doubles.
A positive rate of time preference means that
a. time is relative to consumption
b. consumption in the future is more important than consumption today
c. consumption today is valued less than consumption in the future
d. consumption in the future is valued less than consumption today
e. consumption in the future and consumption today are positively related
Exhibit 8-2
Given the information in Exhibit 8-2, what is the profit-maximizing (or
loss-minimizing) quantity?
a. zero blankets
b. one blanket
c. two blankets
d. three blankets
e. five blankets
Jason can maximize his satisfaction by allocating time among market work, nonmarket
work, and leisure so that the final marginal utilities per hour spent in each activity are
identical.
a. True
b. False
A wage offer that is above the market wage, intended to avoid the adverse selection
problem, is called a(n)
a. efficiency wage
b. union wage
c. selection wage
d. spurious wage
e. opportunity cost wage
Trade restrictions result in all of the following except one. Which is the exception?
a. higher prices
b. fewer choices
c. improved quality
d. misallocation of resources
e. reduced competition
Exhibit 6-5
In Exhibit 6-5, the marginal utility of consuming the first scone is
a. 0
b. 2
c. 8
d. 9
e. 10
Economists believe that
a. people who choose to promote the interests of others cannot be acting rationally in
their own self-interest
b. people show concern only for those whom they know personally
c. charitable donations would disappear if tax deductions for charitable giving were
eliminated
d. the notion of self-interest rules out concern for others
e. concern for the welfare of others is consistent with the concept of self-interest
One problem associated with intellectual property is that
a. only one person can use it at a time
b. the patent system reduces incentives to create new intellectual property
c. the cost of producing it usually exceeds the benefit
d. encryption software creates monopoly power
e. the original producer has difficulty preventing non-paying beneficiaries from
consuming the property
Which of the following describes a situation in which demand must be elastic?
a. Total revenue increases by 15 percent when the price of corndogs rises by 15 percent.
b. Total revenue increases by less than 15 percent when the price of corndogs rises by
15 percent.
c. Total revenue decreases by more than 15 percent when the price of corndogs rises by
15 percent.
d. Total revenue increases by $15 when the price of corndogs rises by $15.
e. Total revenue increases by more than $15 when the price of corndogs rises by $15.
If Monica has a comparative advantage in baking and George has a comparative
advantage in sewing, then
a. Monica must have an absolute advantage in baking
b. Monica must have an absolute advantage in sewing
c. George must have an absolute advantage in baking
d. George must have an absolute advantage in sewing
e. we can conclude nothing about absolute advantage