Which of the following is not a barrier to entry?
a. Legal restrictions
b. Patents
c. Large sunk costs
d. Survivor rights
One protection that encouraged entrepreneurs in the U.S. was the enforceability of
contracts by the courts.
a. True
b. False
John Amaker owns orange groves and hires pickers for a two-week period as shown in
Table 7-3.
Table 7-3
In Table 7-3, negative returns set in with picker
a. 6.
b. 7.
c. 8.
d. 9.
e. There are no negative returns in this table.
John Maynard Keynes was the author of the book, The Economics of Welfare, which
first addressed environmental problems in terms of externalities.
a. True
b. False
A change in the price of one good results in a rotation of the budget line, so that it is
steeper or flatter.
a. True
b. False
Which of the following observations is true?
a. Free markets will achieve all of society’s goals.
b. The ability to buy goods is divided equally among consumers.
c. The market deals with efficiency in production through the profit motive.
d. The market system encourages firms to use inputs wastefully.
Tax deductions were significantly ____ under the Tax Reform Act of 1986.
a. increased
b. decreased
c. expanded
d. left unchanged for individual taxpayers
Workers in Adam Smith’s famous pin factory example, who were proficient in pin
production, then faced the problem of
a. too many different tasks.
b. becoming bored with their jobs.
c. having to exchange pins for other goods and services.
d. not having enough pins to purchase other goods and services.
In a free-market economy, the pricing mechanism always operates to
a. produce an equitable distribution of income.
b. provide an efficient allocation of resources.
c. correct any inequality in distribution of output.
d. equate consumers’ desires with ability to pay.
Why do airlines tend to lower ticket prices in the winter?
a. Supply is relatively variable, and a drop in demand lowers equilibrium price.
b. Demand is relatively variable, and a drop in supply lowers equilibrium price.
c. A drop in both supply and demand lowers equilibrium price.
d. Supply is relatively fixed, and a drop in demand lowers equilibrium price.
e. Demand is relatively fixed, and a drop in supply lowers equilibrium price.
Figure 18-3
In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?
a. 1
b. 2
c. 3
d. 4
Although specialization of labor increases efficiency of production, it can lead to
another major problem:
a. the need to exchange goods among producers.
b. the need to remain fully employed.
c. the depletion of natural resources.
d. assuring that exchange leads to mutual gains.
e. All of the above are correct.
Interest in environmental problems has intensified, perhaps because
a. for the first time in history in the 1970s people began to die from pollution-related
diseases.
b. rising incomes have caused people to be more concerned with the quality of their
lives.
c. the centrally planned economies are polluted.
d. All of the above are true.
____ is one in which exactly the amount one competitor gains must be lost by other
competitors.
a. Nash equilibrium
b. Prisoner’s dilemma
c. A win-win situation
d. A zero-sum game
If a monopoly firm reduced the price of its product, which of following must have been
true?
a. MR > MC
b. MR < MC
c. MR > AR
d. MC > AR
Is increased production of a good beneficial to society?
a. Yes, because scarcity is such an overriding concern.
b. Yes, because more is always better.
c. Maybe, it depends on what is foregone.
d. No, because increased production does not increase utility.
Regarding poverty in U.S. society, it is correct to say that:
a. Poverty affects a relatively small number of Americans.
b. Poverty results from a failure to work hard.
c. Most of the poor live in inner cities.
d. None of these statements is true.
Voluntary exchange
a. is usually beneficial to one party, but not the other.
b. is always beneficial to both parties.
c. is occasionally beneficial to both parties.
d. occurs only between nations, not between individuals.
The factors of production include all goods and services produced in an economy.
a. True
b. False
Economics is the study of the logic of
a. rational decisions.
b. decision-making activities.
c. ends and means.
d. choosing options from those available.
e. All of the above are correct.
After Hurricane Katrina, construction wages in New Orleans rose partly becauseof the
loss of a workingpopulation.
a. True
b. False
Voluntary exchange results in mutual gains.
a. True
b. False
A demand curve with unit elasticity can never touch either the vertical or horizontal
axes.
a. True
b. False
Suppose that deposit insurance were reduced to a maximum of $50,000 per account
(instead of $250,000). This would address the specific market imperfection of
a. externalities.
b. imperfect information.
c. rent seeking.
d. moral hazard.
The market level (magnitude) of economic rent is determined by the
a. supply side of the market.
b. demand side of the market.
c. intersection of supply and demand.
d. elasticity of demand for land.