When economists are critical of government regulations that prohibit free individuals
from making certain kinds of contracts, for example, to purchase a good or service, they
will usually invoke the concept of
a. marginal analysis.
b. mutual gains from voluntary trade.
c. inflation-unemployment trade-off.
d. the need for abstraction.
e. externalities.
The demand for potatoes at current prices is likely to be
a. elastic.
b. inelastic.
c. unit elastic.
d. perfectly elastic.
Higher prices
a. are always against the public interest.
b. may sometimes serve the public interest.
c. should never be allowed.
d. occur automatically for abundant goods.
The Red Jacket Mountain View Inn in New Hampshire charges $159 per room in the
winter ski season and $114 during the summer months. The number of rooms and
operating costs are constant year round. These prices indicate
a. rightward shifts in the demand curve in the summer.
b. a rightward shift in demand in the winter.
c. leftward shifts in the supply curve in the summer.
d. a leftward shift in demand in the winter.
The opportunity cost of any decision is the forgone value of the next best alternative
that is not chosen.
a. True
b. False
A public good is
a. any good provided by government.
b. a good that can be most cheaply provided by government, though it may in fact be
provided by private enterprise.
c. a good whose benefits cannot readily be restricted to a small group of people.
d. a good whose benefits cannot be enjoyed by an individual alone.
Drawing the supply curve and the demand curve on the same graph helps show how
price is determined.
a. True
b. False
Economics tells us which resource allocations are preferable.
a. True
b. False
Which of the following best describes the concept of “derived demand?”
a. The price of corn land determines the price of corn.
b. The price of corn land has nothing to do with the price of corn.
c. The price of corn determines the price of the land on which corn is grown.
d. Cheap labor means cheap corn.
One important role for government as referee is in defining and enforcing property
rights.
a. True
b. False
An increase in price will increase supply.
a. True
b. False
A recent issue of the Wall Street Journal headlined a story, “Bond Prices End Lower.”
From this we can conclude
a. interest rates fell.
b. interest rates rose.
c. interest rates did not change.
d. stock prices fell.
In Figure6-1,
a. D1 is more elastic than D2 below P2 and less elastic above P2.
b. D1 is less elastic than D2 at all prices.
c. D2 is less elastic than D1 at all prices.
d. D2 is more elastic than D2 above P2 but less elastic below P2.
When the economy experiences a bust, the government knows exactly which policies
will spur an economic recovery.
a. True
b. False
Price floors set a legal minimum price on a product or commodity.
a. True
b. False
Monopolistic competitors and perfect competitors are alike in
a. having horizontal demand curves.
b. zero economic profit in the short run.
c. zero economic profit in the long run.
d. relying on advertising to attract buyers to their products.
An optimal decision is one that chooses the most desirable from among all possibilities
that are available.
a. True
b. False
If the average cost of a product is $10 per unit and the price is $5, the firm is losing
money.
a. True
b. False
The market for a perfectly competitive industry clears at a price of $3, and the
minimum average cost for all firms is $2.50. In the long run, we would expect an
increase in
a. each firm’s output.
b. the number of firms.
c. each firm’s profit.
d. each firm’s average cost.