Which of the following is not an explicit cost?
a. salaries
b. sales taxes
c. the cost of utilities, such as gas and electricity
d. insurance premiums
e. the value of a firm owner’s time
Which of the following is not a criticism of the national defense argument for trade
restrictions?
a. National defense only makes sense in the absence of international trade.
b. Stockpiling basic military hardware could eliminate the need to protect the domestic
industry.
c. Nearly all industries can make some claim to strategic importance, so such trade
restrictions can get out of hand.
d. National defense considerations can outweigh concerns about efficiency.
e. Government subsidies to domestic producers may be more efficient than trade
restrictions.
Exhibit 2-2
According to Exhibit 2-2, Hans and Maria would be better off if
a. Hans specialized in typing and Maria in doing laundry
b. Hans specialized in doing laundry and Maria in typing
c. each did their own laundry and typing
d. Maria did all of the typing and all of the laundry
e. Hans did all of the typing and all of the laundry
A point inside the production possibilities curve illustrates a situation in which
resources are not fully employed
a. True
b. False
A tax on productive activity tends to
a. increase formal market activity because it decreases prices
b. decrease formal market activity because it increases work incentives
c. decrease formal market activity because it lowers the return on such activity
d. decrease activity in the underground economy because people are afraid of being
connected with tax fraud
e. increase activity in the underground economy because people are afraid of being
connected with tax fraud
As imports rose in 13 major industries studied by Shepherd, these U.S. producers,
finding themselves at a cost and quality disadvantage relative to imported goods,
initially responded by
a. improving technology
b. exiting the industry
c. seeking trade barriers
d. asking that quotas and tariffs be removed
e. raising prices to recoup their losses
Exhibit 12-1
Along which part of the labor supply curve in Exhibit 12-1 does the income effect of a
wage change outweigh the substitution effect?
a. between points a and b
b. between points a and c
c. between points b and c
d. between points b and d
e. between points c and d
A price searcher is any firm that has no control over price and must accept the market
price as given.
a. True
b. False
Which of the following is also known as the firm’s planning curve?
a. the average total cost curve
b. the total cost curve
c. the long-run average cost curve
d. the long-run marginal cost curve
e. the fixed cost curve
Under a fixed exchange rate system, an increase in Japanese demand for U.S.
agricultural goods would
a. cause the U.S. balance of trade to worsen
b. increase the supply of yen relative to the dollar
c. decrease Japanese demand for dollars
d. cause the yen to appreciate
e. cause an immediate revaluation of the yen
A monopolist’s marginal revenue curve is flatter than its demand curve.
a. True
b. False
Which of the following is a long-run adjustment?
a. A new economics professor is hired on campus.
b. General Motors increases its orders for steel.
c. Microsoft cuts back its hiring of new graduates.
d. Glow Electric disassembles one of its nuclear power plants.
e. Texaco buys more crude oil to refine into gasoline.
A marginal adjustment only refers to a minor change.
a. True
b. False
If firms pollute when they produce,
a. marginal social cost equals marginal private cost
b. marginal private cost exceeds marginal social cost
c. marginal social cost exceeds marginal private cost
d. marginal social cost equals marginal external cost
e. marginal social cost equals marginal private cost, which equals marginal external cost
Secondary effects are consequences of economic actions that develop slowly over time
as people react to events.
a. True
b. False
“Efficiency” refers to
a. producing output using the least amount of labor
b. producing output using the least amount of capital
c. producing as far inside the production possibilities frontier as possible
d. producing only one out of many possible commodities
e. getting the maximum possible output from available resources
All of the following are true concerning the flexible exchange rate system except one.
Which is the exception?
a. It is the same as a floating exchange rate system.
b. It is a system in which supply and demand determine the exchange rate.
c. Government officials have little direct role in the foreign exchange market.
d. Exchange rates may fluctuate considerably from time to time.
e. Exchange rates are fixed by the central banks of the various countries.
According to rent-seeking theory, which group is most likely to benefit from
representative democracy?
a. consumers
b. taxpayers
c. the poor
d. children
e. lawyers
Which of the following is a characteristic of a pure command economy?
a. all resources are privately owned
b. economic activity is coordinated by the price system
c. competitive markets guide resources to their highest-valued uses
d. centralized economic planning is used to answer the basic economic questions
e. economic choices are voluntary and are based on rational self-interest
In deciding between using a public bureau or a private firm to collect garbage, elected
officials may prefer a public bureau because
a. public bureaus have been shown to be more efficient than private firms in garbage
collection
b. they can convey political favors by giving people jobs in the public bureau
c. public bureaus will be more responsive to consumers
d. citizens would have to pay if private firms collected garbage
e. taxes will be lower if the public bureau is in charge of garbage collection
For a nondiscriminating monopolist, which of the following statements is true?
a. Unlike a firm in perfect competition, a monopolist produces where MR > MC.
b. The monopolist’s marginal revenue curve is the same as its demand curve.
c. The monopolist will always produce in the inelastic range of its demand curve.
d. The monopolist does not have a supply curve.
e. The monopolist produces where MR < MC.
Exhibit 16-2
Refer to Exhibit 16-2. How much of a surplus of wool does the $6 price support
generate?
a. 100 million pounds
b. 60 million pounds
c. 150 million pounds
d. 90 million pounds
e. $500 million
In its case against Microsoft, the government contended that Microsoft
a. was engaging in exclusive dealing
b. was integrating its browser into Windows 98 as a way of boosting the browser’s
market share
c. was integrating its browser into Windows 98 as a form of predatory pricing
d. had attempted to engineer a vertical merger
e. was using tying contracts
If an industry consists of only four firms with equal market shares, then the Herfindahl
index
a. is 25
b. is 10,000
c. is 100
d. is 2,500
e. cannot be calculated without additional information
Natural monopolies occur when
a. government antitrust laws are too weak or not enforced
b. negative externalities are present
c. firms collude to set prices and divide the market among themselves
d. one firm can service the market more cheaply than two or more firms can
e. a public good is produced by a private firm
Revenue from a(n) __________ goes to the U.S. government while revenue from a(n)
__________ goes to whomever secures the right to sell foreign goods in the U.S.
market.
a. export subsidy, quota
b. tariff, quota
c. domestic content requirement, low-interest loan
d. tariff, export subsidy
e. quota, tariff
Which of the following is not a country that has more people over the age of 65 than
under the age of 15?
a. Italy
b. Japan
c. Burundi
d. Germany
e. Portugal
“It doesn’t hurt to get more information . . .” is good advice
a. especially when the opportunity cost of acquiring the information is high
b. when information is less than perfect
c. only if the marginal benefit of information is greater than the marginal cost of
information
d. only if the marginal benefit of information is equal to the marginal cost of
information
e. only if the marginal benefit of information is less than the marginal cost of
information
Exhibit 4-14
Refer to exhibit 4-14. An increase in the price of baby formula would cause which of
the following to happen?
a. demand shift from D1 to D2
b. move on demand curve D1 from a to b
c. demand shift from D2 to D1
d. move on demand curve D2 from d to c
e. move from b on demand curve D1 to c on demand curve D2
Exhibit 6-24
Which of the following represents a correct preference ordering for the indifference
map represented in Exhibit 6-24?
a. point a, b, e
b. point b, c, d
c. point d, c, a
d. point d, a, b
e. point c, a, f
Dumping is the practice of
a. selling a lower quality product abroad
b. selling a commodity abroad at a price lower than the domestic price
c. selling a commodity abroad at a price higher than the domestic price
d. flooding a foreign market with large quantities of a good
e. most less-developed countries but not industrialized countries
An improvement in technology would
a. enable the economy to produce outside its original production possibilities frontier
b. enable the economy to move along its original production possibilities frontier
c. eliminate scarcity; therefore, the production possibilities frontier would no longer
exist
d. have no effect on the production possibilities frontier
e. change the production possibilities frontier to a line with a positive slope
It is not uncommon for people to buy all the components for a computer and assemble
them rather than purchase a fully assembled computer. What does this behavior
demonstrate?
a. computers are easy to assemble
b. people are irrational
c. many people have the knowledge necessary to assemble computers
d. the total price of the computer components is less than the price of the computer
e. the total price of all the computer components plus the value of the person’s time is
less than the price of the computer