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Assume that in Canada the opportunity cost of producing one television set is two
bushels of wheat. Assume that in the United States the opportunity cost of producing
one bushel of wheat is two television sets. If these two countries specialize according to
comparative advantage and then trade with each other:
A. Canada will import both televisions and wheat.
B. Canada will import wheat and export televisions.
C. the United States will import wheat and export televisions.
D. the United States will import both televisions and wheat.
Answer:
A number of states have a minimum wage that is higher than the federal minimum. In
those states that impose a minimum wage above $7.25 an hour, it is more likely that the
minimum wage acts as a binding:
A. price floor, causing excess supply in the market.
B. price floor, causing excess demand in the market.
C. price ceiling, causing excess supply in the market.
D. price ceiling, causing excess demand in the market.
Answer:
Refer to the graph shown. In a perfectly competitive industry, price would:
A. equal $16.
B. be greater than $16.
C. equal $12.
D. be less than $12.
Answer:
For a natural monopoly:
A. ATC > MC.
B. ATC< MC.
C. ATC = MC.
D. there is no relationship between ATC and MC.
Answer:
Alexandra has determined that studying an hour for her economics quiz will improve
her grade on the quiz from 75 to 100. She also determines that this improvement is
worth $20. To study for an hour for her economics quiz, however, she will have to work
one fewer hour at her part-time job. Alexandra should:
A. study for the quiz as long as her hourly wage rate is less than $20.
B. study for the quiz as long as her hourly wage rate is more than $20.
C. study for the quiz only if her hourly wage rate is exactly $20.
D. not study for the quiz because earning a higher grade cannot have a dollar value.
Answer:
Along a straight-line supply curve:
A. elasticity rises as price rises.
B. elasticity declines as price declines.
C. elasticity is equal to slope.
D. the change in elasticity depends on the supply curve in question.
Answer:
Which of the following statements contradicts the evidence shown in the graph shown?
A. Income is more equally distributed in Sweden than it is in Brazil.
B. Income is more equally distributed in Taiwan than it is in the United States.
C. Income is more equally distributed in Sweden than it is in Taiwan.
D. Income is more equally distributed in the United States than it is in Brazil.
Answer:
Along a downward-sloping straight-line demand curve beginning at the price where
demand intersects the price axis, as price declines, revenue:
A. declines.
B. rises.
C. declines and then rises.
D. rises and then declines.
Answer:
Refer to the graph shown. We can conclude from the diagram that:
A. Graustark has a comparative advantage in both goods.
B. Norstrilia has a comparative advantage in both goods.
C. Norstrilia has a comparative advantage in manufacturing and Graustark has a
comparative advantage in agriculture.
D. Norstrilia has a comparative advantage in agriculture and Graustark has a
comparative advantage in manufacturing.
Answer:
Through most of the 20th century in the former USSR:
A. people contributed what they could and took what they needed without a market.
B. the country was free of economic forces.
C. a type of socialism that departed from theory was implemented.
D. goods were distributed according to their need.
Answer:
The Apple iPod is able to play digital music that has a special encoding that makes
pirating music more difficult. In economic terms, this encoding is an attempt to:
A. make digital music more like a private good and less like a public good.
B. reduce the negative externalities of digital music.
C. reduce the adverse selection problem of digital music.
D. increase the marginal social benefit of digital music.
Answer:
Firms pay efficiency wages because these wages:
A. minimize short-run costs.
B. maximize short-run profits.
C. increase worker productivity.
D. increase worker rivalry.
Answer:
Refer to the graph shown. When the market is in equilibrium, total surplus is area:
A. A plus area B.
B. E plus area F.
C. A plus area F.
D. A plus area C plus area F.
Answer:
Refer to the production possibility curve for Ricardia below.
The graph indicates that with the resources and technology it has available, Ricardia:
A. can produce either 40 units of rye or 20 units of eggs.
B. can produce both 40 units of rye and 20 units of eggs.
C. cannot produce both 20 units of rye and 10 units of eggs.
D. cannot produce both 20 units of rye and 5 units of eggs.
Answer:
According to contestable market theory:
A. barriers to entry are much more important than market structure in determining the
degree of price competition in an industry.
B. barriers to entry are much less important than market structure in determining the
degree of price competition in an industry.
C. barriers to entry and market structure are both important in determining the degree of
price competition in an industry.
D. neither barriers to entry nor market structure affects the degree of price competition
in an industry.
Answer:
If nations trade on the basis of comparative advantage:
A. a nation usually can gain from trade only at the expense of its trading partners.
B. exporting nations gain from trade and importing nations lose.
C. importing nations gain from trade and exporting nations lose.
D. all trading partners can gain from trade.
Answer:
A rise in X-inefficiency:
A. shifts the ATC curve up.
B. shifts the ATC curve down.
C. shifts the ATC curve down or up, depending on the nature of the inefficiency.
D. does not affect costs, only the price and quantity.
Answer:
The reason the Federal Trade Commission regulates advertising to prevent false and
misleading claims is:
A. that firms that make false and misleading claims would earn lower profit, resulting
in many firms being forced to shut down and many workers losing their jobs.
B. to create a market for information.
C. to prevent a market failure caused by inaccurate information.
D. to eliminate persuasive advertising.
Answer:
Refer to the graphs shown, which show indifference curve analysis with the associated
demand curves. The best explanation for a movement from point D to point E is:
A. an outward rotation of the budget constraint along the x-axis, allowing the consumer
to move from point A to point B.
B. a parallel shift of the budget constraint, allowing the consumer to move from point A
to point C.
C. an inward rotation of the budget constraint along the x-axis, forcing the consumer to
move from point B to point A.
D. an inward rotation of the budget constraint along the y-axis, forcing the consumer to
move from point C to point B.
Answer:
The false assumption that what is true for a part will also be true for the whole is called
the:
A. fallacy of composition.
B. paradox of thrift.
C. post hoc fallacy.
D. ceteris paribus assumption.
Answer:
Deion Sanders is a two-sport athlete who plays both pro football and pro baseball. He
could earn $1,000,000 playing either sport. Troy Aikman is also a two-sport athlete who
plays both football and auto racing. He could earn $1,000,000 playing football or
$200,000 racing cars. Garo Yepremian can play both football and soccer. He could earn
$1,000,000 playing football or $50,000 playing soccer. Assuming that all three men
have only two options for work and can pursue only one sport full-time, who has the
highest opportunity cost of playing football?
A. Deion Sanders
B. Troy Aikman
C. Garo Yepremian
D. Their opportunity costs are the same.
Answer:
Refer to the graph shown. With a tariff on lumber imported from Canada of $6 per ton,
the revenue the government would collect from the import of lumber would be:
A. $0.
B. $3,600.
C. $4,200.
D. $4,800.
Answer:
The status quo bias implies that:
A. people's actions often are influenced by what they perceive as the default choice.
B. people are restricted in their choices.
C. people are biased toward making a mistake.
D. people do not like making changes.
Answer:
If a firm's average fixed cost is $4 and its average total cost is $6, its average variable
cost is:
A. $1.
B. $2.
C. $10.
D. $20.
Answer:
If MR > MC, a monopolist should:
A. decrease production.
B. increase production.
C. maintain the same level of production.
D. stop producing.
Answer:
Suppose the price of tomatoes dramatically increases. Which of the following could
cause this change?
A. Hurricanes during the late summer damages the Florida crop, shifting supply left
B. A reduction in tariffs of tomatoes from Central American, shifting supply right
C. A news report stating that a pesticide used on tomatoes might cause cancer, shifting
the demand to the right
D. Advertising for catsup increases demand for catsup, shifting the demand curve to the
left
Answer:
In a standard sealed-bid auction, the person who bids:
A. the highest gets the object of the bid.
B. the second highest gets the good and pays that price.
C. the second highest has the option to receive the good if she pays the price of the
highest bidder.
D. the highest gets the object but pays the price bid by the second highest bidder.
Answer:
Refer to the graphs above. The market is fat-free potato chips that contain olestra.
Which graph best represents the impact of increased consumer concern about the effects
of olestra on long-term health?
A. a
B. b
C. c
D. d
Answer:
Refer to the graph shown. Which of the following wage rates would be an effective
price floor?
A. $3.50
B. $4.50
C. $6.50
D. $7.25
Answer:
The text refers to the type of comparative advantage that can be gained or lost because
of changes in skills of workers or types of capital as:
A. unstable comparative advantage.
B. transferable comparative advantage.
C. nonequilibrium comparative advantage.
D. temporary comparative advantage.
Answer:
Which of the following is not a type of labor law in the United States?
A. Child labor laws.
B. Worker safety and health laws.
C. Overtime pay laws.
D. Maximum wage laws.
Answer:
The Consumer Product Safety Commission (CPSC) is charged with protecting the
public from unreasonable risks of serious injury or death from more than 15,000 types
of consumer products. The CPSC is designed to overcome:
A. information problems.
B. positive externalities.
C. negative externalities.
D. direct regulation.
Answer:
Suppose you operate a factory that produces gadgets. Your current output is 1,000
gadgets. If your fixed cost is $10,000 and your total cost is $50,000, the:
A. average total cost of production is $500.
B. average variable cost of production is $40.
C. average variable cost of production is $50.
D. marginal cost of production is $40,000.
Answer:
