The minimum efficient scale for a firm is the
a. lowest rate of output at which long-run average cost is at a minimum
b. lowest rate of output at which short-run average total cost is at a minimum
c. lowest rate of output at which short-run average variable cost is at a minimum
d. average of the rates of output at which long-run average cost is at a minimum
e. average of the rates of output at which short-run average total cost is at a minimum
A decline in demand in a competitive industry will result in
a. a decrease in equilibrium price
b. a decline in the number of firms in the industry
c. economic losses for some firms in the industry
d. a decline in the equilibrium quantity
e. all of the above
Exhibit 15-4
If it is allowed to earn only a normal profit, the regulated natural monopoly in Exhibit
15-4 will set price equal to
a. a
b. b
c. c
d. f
e. e
Which of the following causes the supply of leather jackets to decrease?
a. an increase in the price of leather jackets
b. an increase in the price of leather
c. a decrease in the price of zippers
d. an increase in the number of motorcycles
e. a decrease in consumer income
Whenever the opportunity costs of goods are significantly different in different
countries, there are gains from specialization and trade.
a. True
b. False
If consumers elect to postpone consumption so they can have a more enjoyable future,
the supply of loanable funds would increase and the market rate of interest would fall.
a. True
b. False
A decrease in the price of a good will cause a leftward shift of the demand curve, if it is
a normal good.
a. True
b. False
Which of the following would reduce the supply of an athletic trainer’s services at
today’s wage rate, other things constant?
a. a reduction in the individual’s income from other sources
b. an improvement in the quality of the work environment
c. an increase in the amount of control the trainer has over the use of time on the job
d. a trainer’s future earning possibilities go down due to a new negative image
associated with this work
e. an increase in the trainer’s preference for this type of work
Under the gold standard, gold discoveries in Alaska and South America led to
a. both c and d
b. a decrease in the domestic money supply
c. inflation
d. an increase in the domestic money supply
e. deflation
Antitrust action in the United States
a. has followed an inconsistent pattern of enforcement
b. has always provided specific guidelines for acceptable behavior
c. applies only to natural monopolies
d. involves suing a competitive firm for changing its prices
e. provides protection to those in regulated industries
A temporary price differential in resource markets is
a. eliminated by resource movements
b. caused by a failure of firms to maximize profits
c. eliminated by resources moving from highly-valued uses to lower-valued uses
d. caused by Congress increasing the federal minimum wage
e. a result of firms using the MRP = MRC rule in hiring resources
Marginal utility is the
a. overall satisfaction obtained from consuming a good
b. additional satisfaction obtained from consuming one more unit of a good
c. average satisfaction obtained from consuming a good
d. the change in satisfaction obtained from consuming 1 percent more of a good
e. additional cost of one more unit of a good
If a firm is maximizing profit and the marginal revenue product of labor is $10 and the
marginal revenue product of capital is $30, then
a. the marginal resource cost of labor is $3, and the marginal resource cost of capital is
$0.33
b. the marginal resource cost of labor is $0.33, and the marginal resource cost of capital
is $3
c. the marginal resource cost of labor equals the marginal resource cost of capital; both
are $300
d. the marginal resource cost of labor is 1/3 of the marginal resource cost of capital
e. we have no way of knowing the marginal resource cost of either labor or capital
In New Zealand one worker can produce 40 walking sticks or 10 boomerangs each
hour. What is the opportunity cost of producing one walking stick?
a. 40 boomerangs
b. 10 boomerangs
c. 4 boomerangs
d. 1/4 of a boomerang
e. 1/2 worker
The idea that paying higher wages attracts a more talented labor pool is called the
a. winner’s curse
b. efficiency wage theory
c. marginal productivity theory
d. lemons problem
e. theory of the second best
According to the Coase theorem, if bargaining costs are small, then there will be an
efficient solution to the problem of toxic waste
a. if the creator of the toxic waste is assigned the property rights
b. if the victim of toxic waste is assigned the property rights
c. regardless of which party is assigned the property rights
d. if the property rights are shared equally between the creator and the victim of toxic
waste
e. in the form of a pollution tax
At a given rate of output, marginal cost equals the slope of the
a. long-run average cost curve
b. short-run average total cost curve
c. planning curve
d. total cost curve
e. average variable cost curve
An arbitrageur in foreign exchange is a person who
a. buys foreign currency, hoping to profit by selling it at a higher exchange rate at some
later date
b. earns illegal profit by manipulating foreign exchange
c. causes differences in exchange rates in different geographic markets
d. simultaneously buys large amounts of a currency in one market and sells it in another
market
e. mediates disputes when there is no agreement on exchange rates in international
currency markets
Exhibit 5-15
Which of the demand curves in Exhibit 5-15 has constant elasticity everywhere?
a. the curve in graph c only
b. the curves in graphs a and b
c. the curves in graphs a, b, and c
d. all of the curves shown
e. the curves in graphs c, d, and e
Exhibit 13-8
In Exhibit 13-8, D0 and S0represent the initial demand and supply of loanable funds. A
technological breakthrough that increase the productivity of capital would result in a
movement in this market from point a to
a. point b
b. point c
c. point d
d. point f
e. point g
Exhibit 8-19 A Single Firm in a Perfectly Competitive Market
Consider Exhibit 8-19. When the market price is P2, which of the following most
acurately reflects the firms short-run situation?
a. The firm will choose to produce quantity Q4and earn exactly 0 profit
b. The firm will choose to produce quantity Q4and earn a profit
c. The firm will choose to produce quantity Q4and suffer a loss
d. The firm will choose to produce quantity Q5and earn a profit > 0
e. The firm will choose to produce quantity Q5and earn exactly 0 profit
Which of the following firms is most likely to be a perfectly competitive firm?
a. one of the three largest U.S. automakers
b. one of the “Seven Sisters” oil producers
c. a public school operated by the government
d. a soybean farmer
e. a manufacturer of refrigerators
Luigi owns and operates a small restaurant. The income he receives from the restaurant
is classified as
a. saving
b. proprietor’s income
c. wages and salaries
d. rental income
e. dividends
Property rights can be defined and enforced
a. only by the government
b. only by ethical norms
c. by the government and by ethical norms
d. only through constant renegotiation
e. by government, by informal social actions, and by ethical norms
The difference between normal and inferior goods is that
a. normal goods are of better quality than inferior goods
b. an increase in price will shift the demand curve for a normal good rightward and the
demand curve for an inferior good leftward
c. if the price of a normal good increases, individuals who buy it are poorer; for inferior
goods, the opposite is true
d. an inferior good is something that will not be demanded until quantities of the normal
good have been exhausted
e. an increase in income will shift the demand curve for a normal good rightward and
the demand curve for an inferior good leftward
As the wage rate increases, the substitution effect causes workers to supply more time
to market work and the income effect causes them to supply less time to market work.
a. True
b. False
Which of the following is not prohibited by the Clayton Act, even if it reduces
competition?
a. merger accomplished through the acquisition of another firm’s stock
b. merger accomplished through the acquisition of another firm’s assets
c. price discrimination that cannot be justified on the basis of cost differences
d. exclusive dealing contracts
e. interlocking directorates
One likely result of monopoly power is
a. a wide variety of substitute products from which consumers can choose
b. an elimination of barriers to industry entry
c. a decline in government regulation
d. a higher price than would exist in a competitive industry
e. an improvement in allocative efficiency
Government attempts to prohibit monopolization of a market are known as
a. antitrust regulation
b. economic regulation
c. social regulation
d. anticompetitive regulation
e. Herfindahl regulation
The demand curve for euros shows
a. a direct relationship between the dollar price of a euro and the quantity of euros
demanded
b. an inverse relation between the dollar price of a euro and the quantity of euros
demanded
c. that the higher the dollar price of a euro, the greater the quantity demanded
d. that the more expensive it is to buy euros, the larger the quantity of European goods
demanded by Americans
e. that the dollar price of the euro is being held fixed by the European Union
Permanent differentials in resource prices will cause
a. all of the following
b. the allocation of fewer resources to lower-paid uses
c. the equalization of payments for the same resource in different uses
d. no change in the allocation of resources
e. the allocation of more resources to higher-paid uses
The present value of receiving M dollars two years from now when the prevailing
interest rate is i is equal to
a. M – i2
b. M i2
c. M/i
d. M/(1 – i)
e. M/(1 + i)2
Under certain conditions, the slope of the marginal revenue product curve reflects the
combined effects of diminishing marginal returns and a declining price of the product
the firm sells. What are these conditions?
a. The firm must be a price searcher in both the product market and the resource market.
b. The firm must be a price searcher in the product market, regardless of whether it is a
resource price searcher.
c. The firm must be a price searcher in the product market but not necessarily in a
perfectly competitive resource market.
d. The firm must be a price searcher in a perfectly competitive product market.
e. The firm must operate in a decreasing-cost industry.
Which of the following would an economist classify as capital?
a. 100 shares of Microsoft stock
b. a $50 bill
c. a credit card
d. a lawyer’s personal computer
e. a bauxite mine in Jamaica
Newly industrialized countries typically have lower GDP growth rates than more
developed industrialized countries.
a. True
b. False