When diminishing marginal returns set in, marginal product is
a. positive and increasing
b. positive and decreasing
c. negative and increasing
d. negative and decreasing
e. zero
Unions whose membership is confined to workers with a particular skill are known as
a. industrial unions
b. limited unions
c. regional unions
d. craft unions
e. inclusive unions
Suppose that at the current level of output, Pat’s Hats has fixed costs of $500, variable
costs of $1,000, and $2,000 in total revenue. Which of the following is true?
a. Profit is currently $500 and, in the long run, it will be $1,000 because there will be no
fixed costs.
b. Profit is currently $500 and, in the long run, it will be $1,500 because there will be
no variable costs.
c. Profit is currently $500.
d. Profit is currently $500, and Pat’s Hats will want to decrease its plant size in the long
run to lower its fixed costs.
e. Pat’s Hats will continue to operate as long as revenue is greater than $500.
Which of the following problems best describes what may occur when Dixie hires an
attorney to help in her child-custody suit?
a. the winner’s curse
b. a signaling problem
c. a principal-agent problem
d. an adverse selection problem
e. unemployment
Adverse selection is more likely when a job requires intangible or unmeasurable
abilities.
a. True
b. False
Which of the following helps explain why pesticides account for much of the water
pollution in the United States?
a. Pesticide regulations were repealed during the Reagan administration.
b. Pesticide regulations are often administered by state environmental protection
agencies, not the federal Environmental Protection Agency.
c. Pesticide regulations are administered by the federal Environmental Protection
Agency, not by state agencies.
d. Pesticide regulations are often administered by state agricultural departments rather
than environmental protection agencies.
e. Pesticide regulations are often administered by state environmental protection
agencies rather than agricultural departments.
An exchange rate is
a. the rate at which goods are traded between countries
b. the rate of the net difference between exports and imports
c. the denomination of currency used to purchase imports
d. the price of one currency in terms of another
e. the price at which one good trades for another
Maryann and Don want to open their own deli. To do so, Maryann must give up her job,
at which she earns $20,000 per year, and Don must give up his part-time job, at which
he earns $10,000 per year. They must liquidate their money market fund, which earns
$1,000 interest annually. The rent on the building is $10,000 per year, and expenses for
such necessities as utilities, corned beef, and pickles are $35,000 annually. What
minimum amount of revenue per year would make it worthwhile, financially, for
Maryann and Don to operate the deli?
a. $10,000
b. $35,000
c. $45,000
d. $31,000
e. $76,000
Exhibit 5-28
Consider Exhibit 5-28. Between points c and d, demand would be said to be
a. perfecly price inelastic
b. price inelastic
c. perfectly price elastic
d. price elastic
e. unitary elastic
If consuming a good creates a positive externality,
a. marginal private benefits exceed marginal social benefits
b. marginal social benefits exceed marginal private benefits
c. private demand is equal to marginal social benefit
d. private demand is greater than marginal social benefit
e. the private demand curve shifts to the right to coincide with the marginal social
benefit curve
People change their consumption choices in response to changes in price because of
a. the income effect and the substitution effect
b. the substitution effect
c. the utility effect
d. the income effect
e. both the income effect and the utility effect
Which of the following will not shift the market supply curve for corn?
a. a change in the price of corn
b. a change in the price of soybeans
c. a change in the price of herbicides and pesticides
d. a change in storage technology
e. a change in the number of acres planted in corn
Because present consumption is more highly valued higher than future consumption,
interest is paid.
a. True
b. False
Exhibit 10-7
At the profit-maximizing output level, total cost for the firm in Exhibit 10-7 is
approximately
a. $5,700
b. $5,320
c. $4,750
d. $4,940
e. $8,100
Antitrust laws attempt to promote competition by controlling
a. market structure only
b. market conduct only
c. market structure and performance
d. market structure and conduct
e. market structure, conduct, and performance
Which of the following is not a problem with trade restrictions?
a. the high cost of rent-seeking activities such as lobbying
b. the high cost of enforcement
c. the unintended effects on related industries
d. the inability to save U.S. jobs in the short run in industries that compete with imports
e. the possibility of retaliation
Considering both product markets and resource markets, most economic decision
makers participate in the economy as both buyers and sellers.
a. True
b. False
Exhibit 6-31
Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31. Then the
price of good B falls. The movement from point a to point c represents
a. the substitution effect
b. the income effect
c. the substitution effect minus the income effect
d. the sum of the substitution and income effects
e. the income effect minus the substitution effect
The Food Stamp program provides
a. quality labels on food
b. cash transfers to the poor
c. cash transfers to the elderly
d. vouchers that can be redeemed for food
e. food deliveries to the elderly
An effective import quota is one that increases the amount of tariff revenues received.
a. True
b. False
Suppliers recognize there is a shortage in the market for their product when they notice
that
a. the quantity supplied exceeds the quantity demanded
b. the quantity demanded is falling
c. inventories are falling
d. production exceeds new orders for the product
e. government economists announce a shortage exists
What is true of marginal cost when marginal returns are decreasing?
a. It is negative and increasing.
b. It is negative and decreasing.
c. It is positive and increasing.
d. It is positive and decreasing.
e. It is positive and has a constant slope.
If transaction costs of market exchange are small, then a firm will expand to produce
more of its product internally.
a. True
b. False
Exhibit 19-1
Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda
and Beta for fish and coconuts. Lambda has a comparative advantage in coconuts and
Beta has a comparative advantage in fish.
a. True
b. False
Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and
labor. If the price of labor is $15 per hour, how many hours of labor can the firm hire if
it spends nothing on machines?
a. 3/4 hour
b. 75 hours
c. 2,667 hours
d. 20,000 hours
e. 300,000 hours
According to William Shepherd, in the U.S. economy
a. Herfindahl indexes have been increasing, indicating a decrease in competitiveness
b. Herfindahl indexes have been decreasing, indicating a decrease in competitiveness
c. the market share of the largest manufacturing firms has increased, indicating a
decrease in competitiveness
d. competition has decreased because of exports, regulation, and insufficient antitrust
activity
e. competition has increased because of more imports, deregulation, and antitrust
activity
Which of the following would not violate the Sherman Antitrust Act if the rule of
reason was used to interpret the act?
a. conspiring to monopolize
b. formation of a trust company
c. conspiring to restrain trade
d. a single firm supplying all of a market with no close substitutes and some barriers to
entry
e. attempting to restrain trade with a foreign nation
Exhibit 9-15
Exhibit 9-15 depicts a non-discriminating monopoly market. Consumer surplus is
represented by area
a. eda
b. ecf
c. dacb
d. dafc
e. abf
A major U.S. motive for negotiating a free-trade agreement with Mexico was to
a. increase immigration into the United States
b. encourage Mexico’s recent drive to achieve a more market-oriented economy
c. keep Mexico from going Communist
d. achieve, ultimately, political union with Mexico
e. help foster the study of the Spanish language in the United States as a means to
trading with all Spanish-speaking countries
The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of
$1,400. The company can also produce 1,000 water pistols for a total cost of $3,000,
but it would have costs of $200 even if it produced no water pistols. Which of the
following is true?
a. Total cost is increasing at a decreasing rate.
b. Total cost is increasing at a constant rate.
c. Marginal cost is positive and increasing as output increases.
d. Variable cost is positive and decreasing as output increases.
e. Fixed cost is positive and decreasing as output increases.
Peg’s Kegs sells kegs in a perfectly competitive market. Because low demand forced
price below average variable cost, Peg has made the short-run decision to shut down.
Her current loss is
a. zero
b. greater than if she had kept operating
c. the same as the losses she was incurring while operating
d. equal to fixed cost
e. less than her total revenue
There is less of a principal-agent problem between managers and apple pickers than
between managers and secretaries because
a. apple pickers naturally work harder
b. secretaries get paid less than their worth
c. productivity is easier to measure in apple picking than in secretarial services
d. a secretary’s marginal product is easier to estimate than an apple picker’s
e. managers can watch apple-pickers more closely than they can secretaries
Exhibit 10-9
If the firm in Exhibit 10-9 produces 100 units of output, it will have
a. both d and e
b. variable cost of slightly less than $800
c. fixed cost of slightly more than $700
d. total cost of $1,500
e. total revenue of $800