A nonexcludable public good is characterized by nonrivalry in
a. production and nonexcludability.
b. consumption and rivalry in production.
c. consumption and excludability.
d. consumption and nonexcludability.
e. none of the above
When the government imposes taxes on firms that are earning high profits, there could
be an unintended effect of reducing the supply of goods in that market compared to
what the supply would be if the profits were not taxed.
a. True
b. False
Suppose the production of a good results in positive externalities. If output occurs at the
intersection of the marginal social benefits curve and the supply curve, then
a. output will be at a higher level than if all benefits were not taken into account.
b. output will be at a lower level than the socially optimal level.
c. the marginal private benefit curve will lie above and to the right of the marginal
social benefit curve.
d. there will be underproduction.
e. all of the above
Exhibit 26-5
If the natural monopoly firm were to maximize profits it would produce __________
quantity of output and charge a price of __________ per unit.
a. Q1; P3
b. Q1; P2
c. Q2; P3
d. Q3; P2
e. Q3; P3
In moving along a demand curve, everything is held constant except buyers’ income.
a. True
b. False
Congressman A promises to vote for a bill that Congressmen B and C are sponsoring,
and in return both B and C promise to vote for a future bill that A is sponsoring. This
practice is called
a. cutting “red tape.”
b. chasing the median voter.
c. rational ignorance.
d. logrolling.
Exhibit 34-9
In the no specialization-no trade case, suppose country X produces and consumes 100
units of good A and 20 units of good B. Country Y produces and consumes 20 units of
good A and 60 units of good B. If the two countries specialize and trade, and the actual
amounts traded are 125 units of good A for 25 units of good B, how many more units of
good B will country Y consume by specializing and trading?
a. 75
b. 5
c. 15
d. 10
e. 50
Suppose the production of a good results in negative externalities. If all costs are taken
into account, then
a. output will be at a lower level than if all costs are not taken into account.
b. output will be at a lower level than the socially optimal level.
c. the marginal private cost curve will lie above and to the left of the marginal social
cost curve.
d. a and b
e. a, b, and c
Candidates in a two-person race express very similar positions a few weeks before the
election. A voter complains that there is not much difference between the two
candidates. What this voter misunderstands or ignores is that
a. each candidate has an incentive to be like the other.
b. each candidate has an incentive to be different from the other.
c. each candidate has an incentive to be perceived as in the “middle of the road,” and if
both candidates correctly act on this incentive they will end up sounding alike.
d. this simply happens sometimes.
e. none of the above
When you purchase a share of stock, you are
a. borrowing funds from the corporation.
b. lending funds to the corporation.
c. selling an ownership right in the corporation.
d. acquiring an ownership right in the corporation.
e. b and d
Which of the following statements is false?
a. An upward-sloping supply curve graphically represents the law of supply.
b. A vertical supply curve graphically represents the law of supply.
c. If income rises and good X is a normal good, then the demand for good X will rise.
d. If income falls and good Y is an inferior good, then the demand for good Y will rise.
Exhibit 39-7
Let E1 represent the initial equilibrium in the market for X. Population growth
combined with the widely publicized results of medical research extolling the virtues of
consuming X will, ceteris paribus, result in a new equilibrium at
a. E2.
b. E3.
c. E4.
d. E5.
e. E4 or E5, depending on the extent of income elasticity of demand.
Exhibit 34-6
The opportunity cost of 1 unit of wine in terms of units of cheese is __________ for
country B.
a. 15
b. 10
c. 5
d. 1
Exhibit 27-5
The marginal revenue product of the first unit of labor is
a. $600.
b. $60.
c. $100.
d. $9.
Exhibit 2-4
As more fax machines are produced, the opportunity cost of producing them
a. increases.
b. decreases.
c. remains constant.
d. first decreases and then increases.
The branch of economics that studies the decisions of individuals and firms is called
a. macroeconomics.
b. microeconomics.
c. microeconomics and macroeconomics.
d. positive economics.
e. normative economics.
In a situation where two goods can be produced by two different people, it is possible
for one person to have a comparative advantage in the production of both goods and the
other person to have the comparative advantage in the production of neither good.
a. True
b. False
In order for good X to be a likely candidate for offshoring, it must be produced with
______________ labor intensity and be a relatively ________________ good.
a. low; light
b. low; heavy
c. high; heavy
d. high; light
A state of rational ignorance
a. is a reflection of too little education.
b. makes sense only if information is a free good.
c. exists only in ideal representative democracies.
d. makes sense when the costs of becoming informed are greater than the benefits.
e. none of the above