The most important characteristic of the equilibrium price is that it
a. guarantees that producers earn profit
b. clears the market, leaving neither a surplus nor a shortage
c. maximizes the quantity demanded
d. minimizes the quantity demanded
e. guarantees that all buyers who desire the product will get it
If output in the calculator market increases by 5 percent when the price increases by
more than 5 percent, then
a. supply is inelastic
b. supply is elastic
c. a small increase in price will cause a leftward shift of the supply curve
d. a small increase in price will cause a rightward shift of the supply curve
e. a large increase in price will cause a large shift of the supply curve
Marginal resource cost is defined as the
a. additional cost of producing an additional unit of output
b. change in resource employment required to increase the units of output produced
c. ratio of marginal revenue product to the market price of the output sold
d. additional cost of employing one additional unit of a resource
e. ratio of the change in total resource usage to the change in total resource cost
The primary differences in economic structure among different countries relate to
ownership of resources and the manner in which economic activities are coordinated.
a. True
b. False
In a winner-take-all labor market,
a. anyone who is hired at any wage is a winner
b. any firm that can hire a worker is a winner
c. a few key people critical to the overall success of the enterprise are rewarded with
substantial pay
d. the person most critical to the overall success of an enterprise is rewarded with
substantial pay, and everyone else is paid the median wage
e. only one worker is paid
A surplus of wheat
a. is impossible if people are hungry
b. is impossible if the price of wheat is below equilibrium
c. will result in an increase the price of wheat
d. is unlikely to result in any change in the price of wheat
e. indicates that the problem of scarcity of wheat has been solved
Exhibit 4-5
Consider Exhibit 4-5. Which of the following statements is most likely correct
regarding the market for corn?
a. In 2008 the quantity purchased exceeded the quantity sold.
b. In 2008 the corn market was not in equilibrium.
c. The weather for corn production was probably better in 2010 than in 2009.
d. Between 2010 and 2011 both the supply and demand for corn must have increased.
e. Between 2009 and 2010 the demand for corn decreased.
Exhibit 11-3
In Exhibit 11-3, which unit of the resource is earning the most economic rent?
a. the first
b. the tenth
c. the fifteenth
d. the hundredth
e. they are all earning the same economic rent
In defending itself against the government’s antitrust action, Microsoft
a. offered to sign a consent decree
b. claimed that it integrated Internet Explorer into Windows 98 in order to make life
easier for its customers
c. admitted that it had practiced predatory pricing
d. denied that its market share exceeded 50 percent
e. claimed that it was employing the rule of reason
Eli Whitney III receives a patent for the rayon gin, a product for which there are no
close substitutes. Eli will maximize his profit when
a. MR is maximized
b. MR = MC
c. MR > MC
d. MR < MC
e. P = MR > MC
In a cartel,
a. all firms produce the same amount of output and earn the same profit
b. all firms produce the same amount of output but earn different amounts of profit
because their costs differ
c. firms produce different amounts of output but earn the same profit
d. firms with higher average cost produce more so that all firms earn the same profit
e. firms with lower average cost often earn higher profits
In one week, Tetah can knit 15 sweaters or bake 480 cookies. The opportunity cost per
sweater for Tetah is
a. $480
b. 480 cookies
c. 32 cookies
d. 1/32 of a cookie
e. 15 cookies
The primary difference between an import tariff and an import quota is that
a. tariffs cause prices to rise, but quotas do not
b. quotas cause prices to rise, but tariffs do not
c. tariffs result in a net welfare loss, but quotas do not
d. quotas result in a net welfare loss, but tariffs do not
e. tariff revenues go to government, but quotas benefit those with the right to sell
foreign goods domestically
The production possibilities frontier will shift if there is a change in
a. technology
b. unemployment
c. product prices
d. society’s preferences for commodities
e. the quantities of the two goods being produced
Which of the following is a disadvantage of the corporation compared to the sole
proprietorship?
a. limited liability
b. difficulty raising start-up money
c. lack of profitability
d. corporate income is taxed twice
e. corporations are more vulnerable in the case of the death of an owner
Which of the following does the United States export?
a. oats
b. coffee
c. oil
d. lead
e. copper
In developing countries, it is not true that
a. banks are often viewed with suspicion
b. at the first sign of economic problems, many bank depositors withdraw their funds
c. because banks cannot rely on a continuous supply of deposits, banks cannot make
loans for extended periods
d. if financial institutions fail to serve as intermediaries between savers and borrowers,
the lack of funds for investment will make growth rates double
e. the credit provided by banks as a percent of total output is one fifth that in
high-income countries
Exhibit 1-11
In Exhibit 1-11, the slope of the line is
a. negative for all values of x
b. positive for all values of x
c. never zero
d. first negative, then positive as x increases
e. first rising, then falling as x increases
Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost
$12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million
and the vertical (robot) intercept isocost line is 5 million. If Manny Motors’ operating
budget became $120 million, the vertical intercept would become
a. 6 million labor hours
b. 20 million labor hours
c. 10 million robot hours
d. 20 million robot hours
e. $120 million
When total utility is falling, marginal utility is
a. increasing
b. decreasing
c. positive
d. negative
e. 0
If a firm can borrow or lend at a 10 percent annual interest rate, it will
a. buy all units of capital with a marginal rate of return above 10 percent
b. buy all units of capital with an average rate of return above 10 percent
c. buy all units of capital with a marginal rate of return below 10 percent
d. buy all units of capital with an average rate of return below 10 percent
e. select only the unit of capital with the highest marginal rate of return, assuming it is
above 10 percent
At various points along the production possibilities frontier,
a. the greatest achievable output levels are illustrated
b. resources are not fully employed
c. more of one good can be obtained without giving up more of the other
d. more efficient output levels are possible
e. society is equally well off
If there is no change in equilibrium price after a $1 per unit tax is imposed on suppliers,
demand must be perfectly inelastic.
a. True
b. False
If Harry’s Blueberries, a perfectly competitive firm, shuts down in the short run, Harry
must pay
a. variable cost but not fixed cost
b. no costs at all
c. variable cost and fixed cost
d. only variable cost
e. only fixed cost
If the exchange rate changes from 1500 lire per U.S. dollar to 1000 lire per U.S. dollar,
the U.S. dollar has
a. appreciated, since its value has increased
b. appreciated, since the price of foreign exchange has increased
c. appreciated, making Italian goods cheaper in U.S. dollars
d. depreciated, since its value has declined
e. depreciated, since its value has increased
Exhibit 7-15 Long and Short-Run cost of Producing Color Printers
If the firm represented in Exhibit 7-15 wants to produce output level Q2, then in the
long run it should build a plant size with average total cost curve of
a. A
b. B
c. C
d. A or B
e. the question cannot be answered with the information given
Unit elastic demand occurs when
a. a one-unit increase in price leads to a one-unit decrease in quantity demanded
b. a 1% increase in price leads to a one-unit decrease in quantity demanded
c. price elasticity of demand is positive
d. price elasticity of demand is exactly zero
e. price elasticity of demand is exactly -1
The official poverty definition in the U.S. is having an income that
a. provides minimum biological needs
b. is less than three times the cost of a nutritionally adequate yet frugal diet
c. places the household in the bottom 20 percent of the income distribution
d. is less than the average U.S. welfare allowance
e. is approximately equal to the average household income of Canada
Which of the following could not contribute to differences in wage rates across
markets?
a. differences in training and education requirements
b. job discrimination
c. differences in risk
d. problems of labor mobility
e. distribution of a new national help-wanted newspaper
The least common form of business organization in the United States is the partnership.
a. True
b. False