Perfectly elastic demand curves are
a. downward sloping
b. upward sloping
c. vertical
d. horizontal
e. steep
The dean of your college is considering hiring another economics professor. If the
additional revenue that the college can earn from employing the professor exceeds the
additional cost, the college should
a. do nothing
b. continue to study the issue
c. hire the professor
d. stop offering economics classes
e. not hire the professor and lay off a professor already on the faculty
Exhibit 17-3
In Exhibit 17-3, the welfare loss (from society’s perspective) that results from 70 units
of air quality is shown by area
a. edcb
b. eda
c. bac
d. adc
e. there is no loss
Exhibit 12-2
In Exhibit 12-2, which of the following is true at a wage rate of $14?
a. The income effect dominates the substitution effect.
b. The substitution effect dominates the income effect.
c. No labor is supplied.
d. The income effect equals the substitution effect.
e. The supply curve is horizontal.
Exhibit 11-10
How low would the wage rate have to fall before the firm in Exhibit 11-9 would hire
nine workers?
a. $198
b. $4
c. $396
d. $28
e. The firm would have to be paid to hire nine workers.
If W equals the price of labor and R equals the price of capital, then at the optimal input
combination, the marginal rate of technical substitution equals
a. Wx R
b. W – R
c. W + R
d. W – 1
e. -W/R
In the long run, the output of a monopolistically competitive firm
a. exceeds that of an otherwise similar perfectly competitive firm
b. is less than that of an otherwise similar perfectly competitive firm
c. is at the point at which LRAC is minimized
d. equals that of an otherwise similar perfectly competitive firm
e. is less than that of an otherwise similar monopolist
In terms of the numbers of firms in the U.S. economy, the most common type of firm is
the
a. corporation
b. partnership
c. sole proprietorship
d. nonprofit organization
e. limited partnership corporation
Of the several ways that the United Auto Workers can increase the wages of its
members,
a. none can also increase employment
b. only direct negotiation of a wage above the competitive level can also increase
employment
c. only restricting the supply of labor can also increase employment
d. only increasing the demand for labor can also increase employment
e. only binding arbitration can also increase employment
In order for Mary to qualify for benefits under a means-tested transfer payment
program,
a. she must have worked and contributed to the program
b. she must be able to repay the cash transfer at a later date
c. the head of her household must be able to hold a job
d. she must be totally disabled
e. her household’s income and/or assets must fall below a certain level
Suppose that you can either buy a radio from a firm for $50 or find and purchase the
components yourself and then either assemble them yourself or hire someone to do so.
You should
a. buy the radio because it’s possible to do so
b. assemble the radio yourself because it’s possible to do so
c. assemble the radio yourself only if you know how to do so
d. assemble the radio yourself only if the total price of all the components is less than
$50
e. assemble the radio yourself only if the total price of all the components plus the value
of your own time is less than $50
Exhibit 8-1
The perfectly competitive firewood market is composed of 1,000 identical consumers
and 1,000 identical firms. Exhibit 8-1 shows cost data for one firm and demand data for
one consumer. What is the equilibrium price?
a. $60
b. $80
c. $100
d. $120
e. It is impossible to determine the equilibrium price because there is no information on
market demand or supply.
If Hannah considers biscuits an inferior good, then when their price falls, she
a. will definitely buy more biscuits
b. will definitely buy fewer biscuits
c. may buy more biscuits
d. will buy fewer biscuits if the substitution effect is larger than the income effect
e. will buy more biscuits if the substitution effect is smaller than the income effect
If two resources, such as labor and farm machinery, are complementary,
a. one can be used in place of the other
b. an increase in the price of one will increase the demand for the other
c. an increase in the price of one will increase the supply of the other
d. a decrease in the price of one will increase the productivity of the other, which will
decrease the demand for that other resource
e. a decrease in the price of one will increase the demand for the other
According to William Shepard, the growth in competition from 1958 to 1988 in the
United States can be attributed to
a. imports, efficient economic regulation, and antitrust activity
b. the rise of the global market and inflation
c. the fall of communism
d. imports, deregulation, and antitrust activity
e. exports, deregulation, and technological improvement
Exhibit 8-11
In Exhibit 8-11, total cost at the profit-maximizing output level is shown by area
a. ejx0
b. giw0
c. mfz0
d. abz0
e. cdy0
The debit side of the current account includes the imports of
a. goods only
b. goods and services
c. services only
d. services and resources only
e. financial assets
If it is employing the rule of reason when considering an antitrust case, the court
a. considers why the offending practice was adopted and its effect on competition
b. does not consider why the offending practice was adopted or its effect on competition
c. ignores the economic rationale for the offending practice and its consequences
d. needs only determine that the offending practice took place
e. considers only whether the firm has market power, not whether it used that power
unreasonably
Unions can increase their wage rates by
a. all of the following
b. decreasing the supply of labor
c. using the threat of a strike
d. increasing the proportion of union workers in the industry
e. increasing the demand for the product they produce and, therefore, the demand for
their labor services
Exhibit 5-26
Refer to Exhibit 5-26. As you move from B to C on the demand curve, total revenue
__________ and therefore the price elasticity must be ____________ between B and C.
a. stays the same; unitary
b. decreases; inelastic
c. increases; elastic
d. decreases; elastic
e. increases, inelastic
When a service, such as medical care, is provided free of charge,
a. most people consume an infinite amount of it
b. most people do not much care about getting good value for their money
c. people do not derive any consumer surplus from it
d. we say that the demand for it is perfectly elastic
e. we say that the demand for it is perfectly inelastic
Which of the following does notcontribute to differences in interest rates?
a. Different loans are for different periods of time.
b. Large loans generate more administrative costs per dollar than smaller loans.
c. Different loans are subject to different tax rules.
d. Loans to established businesses are evaluated differently from loans to new
businesses.
e. The longer the period of repayment, the greater the risk of higher-than-expected
inflation.
Under fixed exchange rates, a central bank
a. adjusts the money supply automatically and immediately to changes in the demand
and supply of foreign exchange
b. need hold no reserves of foreign exchange
c. enforces the fixed exchange rate by refusing to buy or sell foreign exchange
whenever changes occur in demand or supply
d. may find its reserves fluctuating as demand and supply conditions change
e. has no authority to buy or sell foreign exchange
Firms in perfect competition have no control over
a. all of the following
b. where to operate on their average total cost curves
c. what price to charge
d. how many inputs to use
e. how much to produce
Exhibit 13-10
Consider Exhibit 13-10. Which of the lines represents the opportunity of funds
available for investment?
a. a
b. b
c. c
d. d
e. none of the lines
The union participation rate in the United States is
a. highest among government employees
b. highest among private sector workers
c. highest in the smokestack industries
d. highest in the service sector
e. higher than in Sweden
Economic theory allows us to predict the behavior of a specific person or firm.
a. True
b. False
If you were to put the following effects of a decrease in demand into the sequence in
which they occur, which would be last?
a. The demand curve facing each individual firm drops.
b. Each firm reduces quantity supplied to the point where marginal cost equals its
now-lower marginal revenue.
c. In the short run, the market price drops.
d. Market output falls.
e. A short-run loss forces some firms out of business in the long run.
Total utility can be calculated as the
a. sum of all marginal utilities
b. price paid for one unit of a good
c. product of all marginal utilities
d. total expenditure on all units of a good the consumer buys
e. difference between the marginal utilities of the first and last units of a good
Exhibit 7-3
In Exhibit 7-3, diminishing marginal returns set in with the addition of the
a. first worker
b. third worker
c. fourth worker
d. fifth worker
e. seventh worker
Which of the following is a problem with or a limit on antitrust policy?
a. Competition may not require that many firms
b. Abuse of antitrust
c. Growth of international markets
d. Growing doubt about the economic value of lengthy antitrust court cases
e. All of the answers are correct
Which of the following is most likely to be an inferior good?
a. airline travel
b. restaurant meals
c. a subscription to the Wall Street Journal
d. soft drinks
e. used clothing