A sum of money to be received in the future is worth more than a sum of money today.
a. True
b. False
The theory of the kinked demand curve is used to explain
a. bizarre corporate behavior.
b. sales maximization.
c. the maximin criterion.
d. sticky prices in oligopolies.
Economists believe that trade is necessary for prosperity because
a. every country lacks some vital resources that it can get only by trade.
b. each country’s climate makes it a relatively efficient producer of some goods, and an
inefficient producer of other goods.
c. specialization permits large outputs and can produce economies of scale.
d. All of the above are correct.
The use of abstraction in economics is analogous to the use of a road map providing
directions to a location.
a. True
b. False
If Taiwanese workers can produce all goods at lower wages than American workers,
then
a. Americans can still gain by trading with Taiwan.
b. Americans can only lose if they import from Taiwan.
c. Taiwan can only lose if it trades with America.
d. there are no gains from trade that are possible in this case.
e. Americans should be self-sufficient.
National defense made up the largest portion of federal expenditures in 2009.
a. True
b. False
If a society uses the market system, it must rely solely on markets to solve all of its
problems.
a. True
b. False
An oligopolist who sets the price for the industry is a price leader.
a. True
b. False
Voluntary exchange is based on the principle that all parties must gain from trade.
a. True
b. False
The price of coffee rose 50 percent and coffee sales fell 25 percent. Doughnut sales also
fell 25 percent. From this information we can conclude that
a. demand for coffee is inelastic.
b. coffee and doughnuts are complements.
c. the cross elasticity of demand is minus 0.5 percent.
d. All of the above are correct.
The burden of a tax is
a. the amount of revenue that the government raises from the tax.
b. what it would cost in alternative tax revenue to provide the same level of service.
c. greater as the total revenue from the tax decreases.
d. the amount the taxpayer would have to be given to be just as well off in the presence
of the tax as in its absence.
A budget line is the locus of all points representing every input combination of inputs
that the producer can afford to buy with a given amount of money and given input
prices.
a. True
b. False
A student has a chance to see Katy Perry in concert. The student also has a major
economics exam in the morning. If the student goes to the concert,
a. she will get a lower grade on the economics exam.
b. the opportunity cost of the concert is time spent studying.
c. this decision implies a trade-off.
d. All of the above are correct.
According to the process of creative destruction, at first the entrepreneur will be able to
sell her product for
a. a low price because it is not well known.
b. a high price because there is no competition.
c. a fair price because these are contestable markets.
d. at a price of zero until the market is created.
Define the following terms and explain their importance to the study of economics.
a. minimum wage law
b. income and substitution effects
c. backward-bending labor supply curve
d. human capital theory
e. dual labor markets
The scarcity of physical resources is far more fundamental to the study of economics
than the scarcity of funds.
a. True
b. False
Production planning without the market mechanism is very efficiently handled by
central planners.
a. True
b. False
Rent controls are designed to protect consumers from high rents.
a. True
b. False
A firm is generally more interested in marginal profits than in total profits.
a. True
b. False
Figure 6-7
In Figure 6-7, which total expenditure curve belongs to a demand curve that is unit
elastic throughout?
a. 1
b. 2
c. 3
d. 4
What is Jim’s opportunity cost of operating his own business?
a. the total amount of money he puts into capital equipment
b. the value of his labor that is put into the business
c. the cost of hiring his laborers
d. All of the above are correct.
Since World War II, the share of corporate income tax collections in total federal
revenue has been:
a. increasing rapidly.
b. declining rapidly.
c. increasing slowly.
d. declining generally.
If a firm sells its output at a price greater than AC, it will earn economic profit.
a. True
b. False
Demand for a firm has been reliably measured as P = 100 − 5Q where Q is output and
P is price in dollars. Total cost is in the table below. Complete the table and indicate the
level of output and price which a profit-maximizing firm would select and indicate the
same for a sales-maximizing firm.
How does a free-market system address the output selection task?
What is the difference between the short run and the long run as economists define the
two?
The marketing division of a firm has measured demand for its product and reports that
it is 2Q = 24 − P, where Q is units and P is price per unit in dollars. The cost is given in
the table below. Complete the table and determine the profit-maximizing level of output
for this firm.
Give an appropriate remedy for correcting excessive pollution and note any difficulties
in implementing it.
Quebec is capable of producing 10 pallets of wood shingles or 8 barrels of maple syrup
with a unit of labor. Vermont is capable of producing 12 pallets of wood shingles or 12
barrels of maple syrup with a unit of labor. Assume that this is typical of the labor force
as a whole. Which location has the absolute advantage and which has the comparative
advantage, in the production of each good? Can these locations reap gains from trade?
List five major economic activities of government, and give an example of each.