Figure 10-7
In Figure 10-7, output at which point represents short-run but not long-run equilibrium?
a. A only
b. B only
c. both A and B
d. both B and C
On necessities, more of the incidence of tax is
a. borne by the producer.
b. borne by the consumer.
c. shared equally between the producer and the consumer.
d. None of the above is correct.
What does the production possibility curve imply about the resource allocation?
a. Only some points on the curve are efficient.
b. All points on the curve are equally efficient.
c. A point which lies below the curve is more efficient.
d. A point which lies above the curve is readily achievable.
If a decision maker uses marginal analysis, then the relevant costs are the
a. full costs of a particular activity or product.
b. fixed costs which do not vary with the extra activity or output.
c. profits obtained on the activity or product.
d. average costs for a particular activity or product.
e. additional costs of a particular activity or product.
A perfectly contestable market is one in which there are excessive costs to entry and
exit.
a. True
b. False
A firm should use marginal analysis when making a price-output decision.
a. True
b. False
Competitive forces will reduce the effects of employers’ discrimination over time.
a. True
b. False
In relation to prices that would prevail in an uncontrolled market, prices charged by a
black market are usually
a. lower, since it is hard for the sellers to locate buyers.
b. lower, since it is hard for the buyers to locate sellers.
c. higher, since black marketers expect compensation for the risk of being caught.
d. higher, since most people enjoy goods more if they are illegal.
In Figure 5-13, the consumer is better off
a. at A than at E.
b. at B than at D.
c. at any point on U2 than at any point on U1.
d. All of the above are correct.
The short-run average cost curve shows the lowest possible average cost corresponding
to each output level, assuming that all inputs are variable.
a. True
b. False
Table 7-1
In Table 7-1, the average physical product after five workers are hired is
a. 5.
b. 6.
c. 7.
d. 8.
If a firm is using optimal input proportions, it is minimizing its costs.
a. True
b. False
Any event that causes either the demand curve or the supply curve to shift will also
change the equilibrium price and quantity.
a. True
b. False
Average cost is higher with a monopolistically competitive firm than with a perfectly
competitive firm.
a. True
b. False
Railroads have received significant attention from regulators because
a. railroads enjoy significant economies of scale.
b. conditions in the railroad industry are conducive to destructive competition.
c. regulators would like to ensure universal service to all potential railroad customers.
d. All of the above are correct.
From 2007 to 2008, the Federal Reserve System reduced interest rates, the price which
borrowers pay. As a result, economists expected that the quantity of money supplied
would
a. increase.
b. decrease.
c. not change.
d. Uncertain-economic theory has no answer to this question.
A sales-maximizing firm produces the output level at which
a. MR = P.
b. MR = MC.
c. MR = AC.
d. MR = 0.
The majority of American workers are employed in the service sector of the economy.
a. True
b. False
We observe that the price of food rises and the quantity purchased also rises. This
means the
a. supply curve shifted to the left.
b. demand curve shifted to the right.
c. demand curve shifted to the left.
d. supply curve shifted to the right.
American high school students’ test scores, especially in math and science, are higher
than those in OECD countries.
a. True
b. False
Perfect competition and pure monopoly are concepts useful primarily for realistic
application.
a. True
b. False
Any factor that shifts the supply curve inward and to the left and does not affect the
demand curve will raise the equilibrium price and reduce the equilibrium quantity.
a. True
b. False
The principle of comparative advantage explains how
a. one nation can take advantage of another one through international trade.
b. two nations may engage in mutually beneficial trade, even though one of them is
more productive than the other.
c. one individual can take advantage of another through international trade.
d. some people are good at producing everything, while others have no comparative
advantages.
e. some nations end up with large trade surpluses.
Show what happens to the industry equilibrium when new firms enter a perfectly
competitive market in the long run.
After Hurricane Andrew hit Florida and Louisiana, consumers expressed outrage at the
high prices being charged for chainsaws, generators, and bottled water. If governments
followed the consumers’ demands and imposed price ceilings in these markets, what is
the likely result?
What is mercantilism? What are the draw backs of this doctrine?
The following table shows the total physical product of labor. Compute the marginal
physical product of labor and the marginal revenue product of labor at output prices of
$10 per unit and $12 per unit. If labor costs $105 per unit, how much should the firm
hire at each price of output?
Why is it customary to report price elasticity of demand in absolute value terms, while
cross elasticities and income elasticities are reported with their sign attached?
Suppose that a tariff is imposed on imports of minivans. Show graphically what the
effect is in terms of price and quantity of imports. Be sure that your graph is completely
and correctly labeled. What determines how much of the tariff is paid by the buyers of
the minivans?
