Exhibit 14-1
Which of the following is indicated in Exhibit 14-1?
a. Rubber is cheaper to produce than tires.
b. The total cost of producing 100,000 tires is greater than the total cost of producing
200,000 tires.
c. The minimum efficient scale of producing tires is 200,000 tires.
d. The minimum efficient scale of producing tires is greater than 200,000 tires.
e. The marginal cost of the 200,000th tire must exceed the average cost of 200,000 tires.
It is difficult to exclude individuals from the use of public goods and services.
a. True
b. False
Comparative advantage is based on opportunity costs.
a. True
b. False
Bob and Mary each have a Ph.D. in economics. Bob has a job in private industry at
which he earns $90,000 a year. Mary earns half that much as a college professor. Which
of the following could not explain Mary’s career choice?
a. She experiences diminishing marginal utility.
b. She enjoys the flexibility of her schedule.
c. She enjoys teaching.
d. She enjoys the informal atmosphere of a college.
e. She likes having her summers free to do research.
All combinations of inputs along an isoquant line represent the same cost.
Which of the following factors is the most significant in determining the pattern of
international trade?
a. absolute advantage
b. diplomatic expertise
c. comparative advantage
d. overpowering military strength
e. a country’s size relative to another country’s
Exhibit 12-2
In Exhibit 12-2, which of the following is true at a wage rate of $20?
a. The income effect dominates the substitution effect.
b. The substitution effect dominates the income effect.
c. No labor is supplied.
d. The income effect equals the substitution effect.
e. The supply curve is horizontal.
Which of the following is not a gain from division of labor?
a. Workers’ abilities are matched to tasks.
b. Workers gain experience from the repetition of the tasks.
c. Workers save time by not moving to different tasks.
d. Workers’ morale increases as tasks become more specialized.
e. The introduction of labor-saving machinery is possible.
Upon opening a printing and copy shop, a firm budgets $30,000 for copy machines and
labor. The firm can operate its copy machine for 2,000 hours if it buys no labor. What is
the vertical intercept of the isocost line when labor is measured on the horizontal axis?
a. 15 hours of labor
b. 500 hours of labor
c. 15 hours of copy machine operation
d. 2,000 hours of copy machine operation
e. $960,000
If the annual interest rate is 4 percent, a consumer who spends $100 today
a. will have to pay back $104 to the bank
b. would have to pay $104 next year to get the same goods
c. will receive $96 from the bank next year
d. would have to pay $96 next year to get the same goods
e. is giving up the ability to spend $104 on goods next year
According to a recent five-year survey of U.S. business ownership, the number of
black-owned businesses rose
a. 45 percent
b. 450 percent
c. 90 percent
d. 25 percent
e. 4.5 percent
If in market equilibrium the marginal social cost of producing a good exceeds the
marginal private cost,
a. not enough of the product is being produced
b. the price charged for the good is too high
c. the good produces a positive externality
d. the good produces a negative externality
e. the government should produce the good
Exhibit 12-4
In Exhibit 12-4, when the wage rate increases from $9 to $12, the substitution effect
outweighs the income effect.
a. True
b. False
Just as resources are scarce for the individual,
a. they are also scarce for the economy as a whole
b. they are never scarce for the economy as a whole
c. they are randomly abundant for other individuals
d. there will be zero resources available for the economy as a whole
e. the economy a whole is never faced with having to make rational choices about using
resources
The U.S. Department of Agriculture defines the official poverty level as
a. the bottom 10 percent of the income distribution
b. the poorest 2 million households
c. income less than $15,000
d. income equal to three times the estimated cost of a nutritionally adequate diet
e. being unemployed for more than two months
Weak economies with shrinking incomes tend to buy more of everything, including
imports.
a. True
b. False
Which of the following responses to a positive externality enhances society’s welfare?
a. taxes
b. subsidies
c. effluent fees
d. quotas
e. a cut in funding
Suppose research indicates that the effects of a one degree increase in Earth’s average
temperature would be much more devastating than previously believed. Therefore, the
greater the marginal benefit of reducing greenhouse gases, other things constant,
a. the lower the optimal level of emissions
b. the higher the optimal level of emissions
c. the likelier that the level of emissions would have no effect
d. the lower the optimal level of cleaner air
e. None of the answers is correct
The current account shows international transactions in goods and services, the capital
account shows international transactions involving the flow of financial assets, and the
official reserve transactions account shows movement of international reserves.
a. True
b. False
Price-discriminating, profit-maximizing monopolists charge higher prices to buyers
who have more elastic demand curves.
a. True
b. False
If the price of vanilla ice cream decreases, it is likely that
a. demand for vanilla ice cream will increase
b. demand for vanilla ice cream will decrease
c. demand for chocolate ice cream will increase
d. demand for chocolate ice cream will decrease
e. the quantity demanded of vanilla ice cream will decrease
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)
intercept of Ann’s budget line is 12, and the vertical (video game) intercept of Ann’s
budget line is 24. The slope of the budget line is
a. -50
b. -25
c. -1/2
d. -2
e. -$120
Adam Matsumi is an attorney who can charge legal fees above the competitive level
because entry of new competitors is made more difficult by the need to hold a(n)
a. state license
b. patent
c. essential resource
d. economy of scale
e. copyright
Which of the following countries has more even income distribution than the United
States?
a. Canada
b. Brazil
c. Chile
d. Nigeria
e. Philippines
A production possibilities frontier will shift outward if there is an improvement in
technology.
a. True
b. False
In the short run, a perfectly competitive ball bearing manufacturer will continue to
produce at a loss if
a. it is covering all of its fixed cost
b. it is covering all of its variable cost plus part of its fixed cost
c. variable cost is less than fixed cost
d. fixed cost is zero
e. fixed cost is minimized
Exhibit 7-5
In Exhibit 7-5, what is variable cost when no output is being produced?
a. $0
b. $10
c. infinity
d. it is impossible to calculate variable cost unless we know the daily wage
e. it is impossible to calculate variable cost unless we know fixed cost at Q = 0
Economists assume people’s tastes are
a. determined solely by advertising
b. relatively stable over time
c. quite variable
d. irrelevant to utility analysis
e. identical
For a monopolist, marginal revenue is
a. equal to price
b. greater than price
c. less than price
d. represented by a horizontal curve
e. equal to average revenue
A firm should be transparent, meaning
a. the windows at headquarters should be cleaned regularly
b. if executives lie during a stockholder meeting, people should be able to see right
through them
c. someone should be able to look at the books and the balance sheet and tell exactly
what’s going on
d. None of the answers is correct
e. All of the answers are correct
General Motors benefits from tariffs on imported automobiles. Companies that use
many automobiles, such as rental agencies, want to get them cheaply. In this case, the
issue of tariff legislation involves
a. a simple majority because it promises concentrated costs and benefits
b. competing interests because it promises concentrated costs and benefits
c. a simple majority because it promises concentrated benefits and widespread costs
d. competing interests because it promises concentrated benefits and widespread costs
e. competing interests because it promises concentrated costs and widespread benefits