Figure 4-3
A 1985 Harvard study showed that the price of cigarettes does not affect how much an
individual smokes but whether he smokes. If this is correct, which graph in Figure 4-3
shows the typical individual’s demand curve for cigarettes?
a. 1
b. 2
c. 3
d. 4
Figure 4-21
Which price in Figure 4-21 is equilibrium?
a. P1
b. P2
c. P3
In a free market, economic activity is coordinated by
a. central planners.
b. prices.
c. costs.
d. majority rule.
In reality, there is not one labor market, but many.
a. True
b. False
Economic analysis requires both mathematical reasoning and historical study.
a. True
b. False
The United Automobile Workers union can select the most favorable point on the
demand curve for labor and the auto manufacturing companies can do nothing in
response.
a. True
b. False
Cross-subsidization implies that a loss from one product’s sales will be made up by the
profit from another product’s sales.
a. True
b. False
Rent controls are most often designed to protect the investment made by apartment
building owners.
a. True
b. False
Major contributors to pollution are
a. individuals.
b. firms.
c. government.
d. All of the above are correct.
In which of the following ways is a monopolist different from a perfect competitor?
a. Average cost will continually drop as output expands.
b. Price is above marginal revenue.
c. Average total cost equals average fixed costs plus average variable costs.
d. The demand curve for the industry has a negative slope.
Monopolists may in the long run
a. earn positive economic profit.
b. be protected by barriers to entry.
c. grow wealthy at the expense of their consumers.
d. All of the above are correct.
An individual’s demand curve for a good is ____ her marginal utility curve for the
good.
a. based on
b. the mirror image around the vertical axis of
c. twice as steep as
d. half as steep as
An export subsidy is a payment by the government to exporters to permit them to
charge lower prices.
a. True
b. False
What is the “right” degree of abstraction necessary to analyze an economic problem?
a. simple abstraction of only minor details
b. simple abstraction of only irrelevant details
c. total abstraction of all variables
d. total abstraction of all irrelevant details
e. There is no “right” degree of abstraction to analyze an economic problem.
Most economists believe that
a. speculation on financial markets reduces their efficiency and should either be
abolished or heavily regulated.
b. speculation on financial markets does not need to be regulated because it has been
largely eliminated by regulations on program trading.
c. speculation socially benefits financial markets but harms nonfinancial markets.
d. speculation helps both financial and nonfinancial markets function more efficiently.
Greater economic efficiency often leads to greater economic inequality.
a. True
b. False
In a competitive economy, the questions of what, how, and for whom to produce tend to
be regulated by
a. the government.
b. businessmen.
c. the price system.
d. workers.
The income effect is thought to offset the substitution effect among very high wage
earners.
a. True
b. False
In which zone does the total physical product reach it maximum value?
a. Increasing marginal return
b. Negative marginal return
c. Diminishing marginal return
d. Decreasing total physical product