Which of the following is a fixed cost for Wendy’s Hamburgers?
a. the cost of beef
b. electricity to light up the Wendy’s sign
c. gasoline for the trucks that deliver supplies to the various franchises
d. interest on funds borrowed to build new facilities
e. expenditures on paper and plastic for packaging
By requiring that applicants for insurance policies fill out lengthy forms and take a
physical examination, insurers attempt to guard against
a. symmetrical information
b. adverse selection
c. natural selection
d. moral hazard
e. the winner’s curse
The purpose of antitrust laws is to
a. reduce anticompetitive activities
b. increase anticompetitive activities
c. guarantee worker safety
d. promote quality products
e. prevent large-scale production
Around the world, once-socialist countries have replaced central plans with
a. foreign aid
b. budgets
c. special interests
d. markets
e. capital equipment
Exhibit 8-19 A Single Firm in a Perfectly Competitive Market
Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive
firm. If P1 represents the equilibrium market price. What is the profit-maximizing
quantity for the firm?
a. Q1bushels
b. Q2bushels
c. Q3bushels
d. Q4bushels
e. Q5bushels
Exhibit 7-2
Given the information in Exhibit 7-2, at what point do diminishing marginal returns set
in?
a. before the first unit of labor
b. between the first and second units of labor
c. between the second and third units of labor
d. between the third and fourth units of labor
e. between the fourth and fifth units of labor
Which economic question does the decision to give all of the butter the economy
produces to the homeless answer?
a. What to produce?
b. How to produce?
c. For whom to produce?
d. Who has a comparative advantage in butter production?
e. Who has an absolute advantage in butter production?
Exhibit 9-15
In Exhibit 9-15, deadweight loss to consumers from a monopolist that does not price
discriminate is represented by area
a. ecf
b. eda
c. dacb
d. dafc
e. abf
Market interest rates are determined by
a. banks
b. Wall Street
c. the demand for loanable funds
d. the supply of loanable funds
e. the demand for and supply of loanable funds
Suppose you eat at a restaurant that serves clams at a fixed price and crab legs at a price
that varies based on market conditions. Each week, the marginal utility you attach to an
order of crab legs is 100, and the marginal utility of an order of clams is 50. One week
you have crab legs, but the next week you have clams. This means that
a. you are irrational
b. your tastes must have changed
c. the price of clams dropped below the price of crab legs
d. the price of crab legs increased
e. the price of crab legs must have increased to more than twice that of clams
The optimal searcher is likely to not even attempt to secure perfect information even if
it is possible to achieve it.
a. True
b. False
Exhibit 12-6
In Exhibit 12-6, if a union raises the wage to $4, total employment in the market will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
Farm output per worker in the United States has increased since 1950 because
a. of technological improvements
b. there are more farms
c. there are fewer acres of land per farm
d. the supply of farm products is inelastic
e. of a decrease in government subsidies
The General Agreement on Tariffs and Trade (GATT) was established in
a. 1870 to protect U.S. industries and decrease world trade
b. 1921 to manage legal and accounting requirements for U.S. tariffs and quotas
c. 1947 to reduce trade restrictions among 23 countries
d. 1973 to increase trade restrictions, after OPEC significantly raised oil prices
e. 1990 to create a common market
Exhibit 8-10
In Exhibit 8-10, total cost at the profit-maximizing output level equals
a. $4,800
b. $6,000
c. $2,800
d. $3,600
e. $4,000
International trade is most likely to occur whenever
a. one of the trading nations is self-sufficient
b. all of the trading nations are self-sufficient
c. one of the trading nations gains from trade
d. each of the trading nations gains from trade
e. labor is cheaper abroad
A hypothesis is
a. an assumption about behavior
b. a prediction of what will occur given certain assumptions
c. a prediction of what will occur regardless of assumptions
d. a forecast of future events
e. useful only if the assumptions are realistic
In 2011, high-income economies with only about one eighth of the world’s population
produced more than one-half of the worlds output.
a. True
b. False
Owners of corporations are referred to most frequently as
a. entrepreneurs
b. lien holders
c. limited partners
d. managers
e. stockholders
Taxing people according to their marginal valuations of a public good may be efficient,
but it may not be fair if the ability to pay differs.
a. True
b. False
For which of the following goods is the marginal benefit of search likely to be greatest?
a. a pair of shoes
b. an automobile
c. a jar of honey
d. a loaf of bread
e. a pair of jeans
As consumers have a longer time period to respond, the demand for a product typically
becomes more inelastic.
a. True
b. False
Economic regulation of business is justified if, by intervening, government can
a. improve the allocation of resources in society
b. create economic rents for special interest groups
c. reduce output and increase prices for an industry
d. increase tax revenue from the regulated industry
e. force firms to increase their costs of production
Watt Power and Light, an electric company, will suffer an economic loss
a. even at its profit-maximizing output because marginal cost is always less than
average cost
b. even at its profit-maximizing output because average cost is always less than
marginal cost
c. if regulators insist that it produce where price equals marginal cost because marginal
cost is less than average cost
d. if regulators insist that it produce where price equals marginal cost because average
cost is always less than marginal cost
e. if regulators insist that it produce where price equals average cost because average
cost is always less than marginal cost
A signal is
a. a proxy measure of job conditions
b. a proxy measure of a job applicant’s skills
c. used by employers to indicate that a job interview is over
d. an indication of an excess supply of labor
e. an indication of an excess supply of qualified labor
The Bretton Woods agreement established the gold standard.
a. True
b. False
Exhibit 6-11
At point b in Exhibit 6-11, total utility is valued at
a. $30, consumer expenditure is $20, and consumer surplus is $10
b. $26, consumer expenditure is $20, and consumer surplus is $6
c. $20, consumer expenditure is $20, and consumer surplus is $0
d. $30, consumer expenditure is $4, and consumer surplus is $26
e. $20, consumer expenditure is $4, and consumer surplus is $16
A 10 percent increase in the price of root beer causes a 5 percent increase in the
quantity demanded of orange soda. This means that
a. root beer and orange soda are substitutes
b. root beer and orange soda are complements
c. the cross-price elasticity of demand is elastic
d. the cross-price elasticity of demand is equal to 2
e. the cross-price elasticity of demand is equal to -2
A perfectly competitive firm’s profit per unit of output equals
a. price minus average variable cost
b. price minus marginal cost
c. total revenue minus total cost
d. price times quantity
e. price minus average total cost
One reason a computer manufacturer may produce its own microchips rather than buy
them is that it can maintain control over production quality.
a. True
b. False
International trade increases world economic efficiency for the same reasons that
domestic trade increases national economic efficiency.
a. True
b. False
The benefit of the production of capital is
a. decreased current production of consumption goods
b. increased future production of consumption goods
c. the amount of roundabout production
d. abundant capital accumulation
e. the decreased amount of future capital available