The contestable market theory best applies to
a. pure monopoly.
b. oligopoly.
c. monopolistic competition.
d. perfect competition.
Which of the following is not generally considered a failing of market economies?
a. Market economies can have severe swings from boom to bust.
b. Market economies tend to underprovide public goods.
c. Market economies tend to promote equity at the expense of efficiency.
d. Market economies can misallocate resources when property rights are ill defined.
Monopolistic competition is characterized by
a. one firm selling several products.
b. many firms selling the same product.
c. many firms selling slightly different products.
d. one firm selling one product.
Economic problems are made manageable by stripping away some of the unnecessary
details.
a. True
b. False
Advertising never makes sense for an oligopolistic firm.
a. True
b. False
What factors are held constant along a given demand curve for a good?
a. the price of the good
b. the technology used to produce the good
c. the supply of the good
d. consumer incomes and the prices of other goods
The Clayton Act prohibits “all contracts, combinations and conspiracies in restraint of
trade.”
a. True
b. False
A central government collected taxes totaling $120 billion in the previous year. It’s
expenditure during the year was roughly the same. This is an example of a
a. balanced budget.
b. surplus budget.
c. deficit budget.
d. zero budget.
Figure 3-1
The shape of the production possibilities frontier in Figure 3-1 implies that
a. some resources are better suited for producing wheat than for producing barley.
b. the opportunity cost of producing more wheat falls as wheat production rises.
c. the farmer’s technology is not subject to the principle of increasing costs.
d. the financial cost of producing wheat is higher than the financial cost of producing
barley.
The federal agency that monitors and regulates the stock market is the
a. Chicago Mercantile Exchange.
b. Securities and Exchange Commission.
c. Department of Justice.
d. Federal Trade Commission.
A perfectly competitive firm would be willing to remain in the industry in the long run
at zero economic profit because
a. its total revenues would be positive.
b. accounting profit would be negative.
c. revenue is equal to all costs, including the opportunity cost of capital and labor.
d. its fixed costs would prevent it from leaving the industry.
Figure 4-8
Women today are having more babies than women did fifteen years ago. The result is
that mothers today have trouble finding baby-sitters and are shocked at what they must
pay for child care. Which graph in Figure 4-8 best illustrates how the situation has
changed?
a. 1
b. 2
c. 3
d. 4
Rolls Royce may actually sell fewer cars at lower prices due to the ‘snob effect.”
a. True
b. False
A decrease in demand will have what effect on equilibrium price and quantity?
a. Price will increase; quantity will decrease.
b. Price will decrease; quantity will increase.
c. Both price and quantity will increase.
d. Both price and quantity will decrease.
Total physical product is maximized if marginal physical product is zero.
a. True
b. False
Demand and quantity demanded are the same thing.
a. True
b. False
The word “theory” means the same to the scientist as it does to the man on the street.
a. True
b. False
Comparing international trade with trade among the different states of the United States
shows that
a. the logic of international trade is quite different from that of intranational trade.
b. the basic reasons for trade are equally applicable within a country or among
countries.
c. there is no need to study international trade as a special subject.
d. All of the above are correct.
Figure 7-11
Figure 7-11 shows an average cost curve with points on it that correspond to three
quantity levels. Which of the following statements must be wrong?
a. The firm’s technology may show increasing marginal returns as production increases
from A to B.
b. The firm may have positive fixed costs.
c. As production expands from A to B to C, the firm may become increasingly difficult
to manage efficiently.
d. The firm’s average fixed cost may rise as production increases from B to C.
The process of building up capital includes
a. acquiring funds from banks and other sources.
b. use of borrowed funds to hire inputs to build factories, warehouses, etc.
c. completion of the investment process by adding machinery and inventory.
d. All of the above are correct.
What would be the output combination for two products A and B on the production
possibility frontier, if a country uses its entire resources for producing A?
a. A – Maximum; B – Zero
b. A- Maximum, B – Maximum
c. A – Zero, B – Maximum
d. A – Zero, B – Minimum
Opportunity cost is the highest possible price you can receive when you sell an object.
a. True
b. False
Capital, labor, and other factors of production move more freely from country to
country than they do within a country.
a. True
b. False
The average cost curve
a. is the vertical summation of the AFC and the AVC curves.
b. lies below the AVC curve.
c. lies below the AFC curve.
d. is the vertical summation of the MC and AVC curves.
“The hotter it gets, the more water people drink.” This statement implies that the
relationship between temperature and water consumption must have a
a. negative slope.
b. positive slope.
c. slope always equal to one.
d. slope always equal to 45 degrees.