Resources are efficiently allocated when production occurs at that point at which
a. marginal cost intersects average variable cost
b. price is equal to average revenue
c. price is equal to marginal cost
d. marginal revenue equals marginal cost
e. price is equal to average variable cost
For most consumers, the process of learning about the efficiency and durability of
various brands of refrigerators can be considered
a. irrational
b. unproductive
c. a vocation
d. nonmarket work
e. costless
Who would most likely lobby Congress for a price support on wool?
a. retail sweater outlets
b. consumers of wool caps
c. taxpayers
d. wool producers
e. sheep
Exhibit 16-1
Consider Exhibit 16-1. At the support price, how much of a surplus is created?
a. 25 gallons
b. 75 gallons
c. 100 gallons
d. 150 gallons
e. unknown from the information given
All of the following are true of a perfectly competitive firm in long-run equilibrium
exceptone. Which is the exception?
a. Its economic profit will be zero.
b. Its accounting profit may be positive.
c. It will be minimizing average total cost.
d. It will be charging a price equal to marginal cost.
e. Marginal cost is minimized.
If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied
from 20 to 100 units, then the value of price elasticity of supply is
a. 0.38
b. 2
c. 2.67
d. 4
e. 8
When the government sells something it produces,
a. revenue received must be greater than cost to justify government production
b. revenue received must equal cost because government is a nonprofit organization
c. the price does not always reflect the cost of producing the good
d. the price charged is an accurate measure of the benefits generated
e. it prices the good the same way a natural monopolist would
What is the effect of a reduction in the price of steel on the equilibrium price and
quantity of automobiles?
a. Both equilibrium price and equilibrium quantity rise.
b. Both equilibrium price and equilibrium quantity fall.
c. Equilibrium price rises and equilibrium quantity falls.
d. Equilibrium price falls and equilibrium quantity rises.
e. Both equilibrium price and equilibrium quantity remain unchanged.
Exhibit 13-5
Exhibit 13-5 shows data on the various dough-mixing machines that a donut shop is
considering buying. The marginal resource cost of the machine with the three-quart
mixing bowl is
a. $50
b. $100
c. $1,000
d. $3,000
e. $550
Isoquants do not intersect except when a firm doubles the amounts of resources
employed.
A World Bank study suggest a strong link in Africa between governments that
__________ special-interest groups and __________ rates of economic growth.
a. cater to, high
b. cater to, moderate
c. cater to, low
d. ignore, low
e. ignore, moderate
Because resources are scarce,
a. opportunity costs are zero
b. people must make choices among alternatives
c. all human wants and desires can be satisfied
d. resource prices are fixed
e. commodities are free
Screening is the attempt by the uninformed side of the market to uncover the relevant
but hidden characteristics of the informed party.
a. True
b. False
Economic information
a. is usually scarce and costly to acquire
b. is usually available free to any decision maker
c. is usually not required for rational decision making
d. must be complete before any decision is made
e. is usually useful only to governments
Exhibit 19-3
In Exhibit 19-3, if the world price of corn is $6 and there are no trade restrictions, the
United States will
a. produce 7,000, consume 3,000, and import 4,000 bushels of corn
b. produce 7,000, consume 3,000, and export 4,000 bushels of corn
c. have an excess demand for corn
d. be a net importer of corn
e. not produce any corn
Which of the following is nota condition of long-run equilibrium for perfectly
competitive firms?
a. price is equal to marginal cost
b. price is equal to minimum short-run average total cost
c. price is equal to minimum long-run average cost
d. price is equal to marginal revenue
e. economic profit is positive
Exhibit 7-11
Movement from point b to point c in Exhibit 7-11 indicates that the firm is experiencing
a. economies of scale
b. increasing average cost
c. economies of cost
d. a decrease in average plant size
e. diseconomies of scale
Exhibit 11-2
In Exhibit 11-2, total earnings at equilibrium equal
a. $40
b. $80
c. $160
d. $16
e. $8
The more elastic is the supply, the less of a tax is paid by producers
a. True
b. False
A person can cause a negative externality by
a. becoming immunized
b. talking loudly in a restaurant
c. landscaping her lawn
d. paying taxes
e. attending school
If marginal cost exceeds average variable cost,
a. average variable cost is negative
b. average variable cost is increasing
c. marginal cost is greater than average total cost
d. average variable cost is decreasing
e. average fixed cost is increasing
The optimal level of pollution occurs where the marginal social benefit is equal to
a. marginal private cost, which equals marginal social cost plus marginal external cost
b. marginal social cost, which equals marginal private cost plus marginal external cost
c. marginal external cost, which equals marginal private cost plus marginal social cost
d. marginal private cost, which equals marginal social cost plus marginal internal cost
e. marginal social cost, which equals marginal private cost plus marginal internal cost
Suppose the cost of producing copper tubing is $1 per foot. If production costs were
measured on the vertical axis and quantity of copper tubing were measured on the
horizontal axis, which of the following lines would have the smallest slope?
a. a line representing the quantity of tubing measured in inches
b. a line representing the quantity of tubing measured in feet
c. a line representing the quantity of tubing measured in yards
d. the 45-degree line
e. any vertical line
Because some monopolies could still earn an economic profit even if the firm is
inefficient, corporate executives might waste resources by indulging in
a. long lunches
b. corporate jets
c. plush offices
d. None of the answers is correct.
e. All of the answers are correct.
Which act of Congress declared tying contracts, exclusive dealing, and price
discrimination illegal?
a. the Wheeler-Kefauver Act
b. the Sherman Antitrust Act
c. the Clayton Act
d. the Wheeler-Lea Act
e. the Celler-Kefauver Anti-Merger Act
Whether the firm produces or shuts down in the short run, fixed cost is equal to
a. average variable cost
b. total cost
c. sunk cost
d. price
e. marginal cost
The government often enacts regulation that benefits producers because
a. the government seeks to regulate in the best interest of the public
b. consumers have less information than producers and therefore seek government
protection
c. consumers have a strong interest in matters that affect their standard of living
d. producers have a strong interest in matters that affect their specialized source of
income
e. producers seek to act in the best interest of the public
Which of the following would cause a rightward shift of the demand for loanable funds
curve?
a. a fall in the marginal rate of return on investment
b. a fall in the value of the marginal product of capital
c. a rise in the marginal product of capital
d. a fall in the investment demand curve
e. a fall in the price of the product capital produces
Exhibit 9-11
What price will be charged by the profit-maximizing monopolist in Exhibit 9-11 that
does not price discriminate?
a. $60
b. $76
c. $110
d. $120
e. $136
When compared to firms in perfect competition, monopolists tend to charge
__________ prices and offer __________ quantities of output.
a. lower; lower
b. higher; lower
c. lower; higher
d. higher; higher
e. higher; the same
The world’s largest net debtor nation is
a. Russia
b. China
c. Brazil
d. Mexico
e. the United States
If a monopolistically competitive firm is in long-run equilibrium and average cost
equals $150, then the market price must be $150.
a. True
b. False