The psychological rewards of inventing a new product generally result in ____ profits
for entrepreneurs.
a. below average
b. only average
c. above average
d. indeterminate
Economists favor a negative income tax because they believe
a. that it will create more jobs for economists to monitor the program.
b. the current welfare programs have excessively high work incentives, which result in
less total work.
c. it is more efficient than the existing welfare system because NIT provides better work
incentives.
d. All of the above are true.
The U.S. Constitution
a. prohibits tariffs on trade between Arkansas and New York but allows tariffs on trade
between Hawaii and Alaska.
b. prohibits tariffs on all trade.
c. allows tariffs on trade with other countries, but not on trade between the states.
d. allows tariffs only on goods purchased from the communist nations.
At high levels of interest, borrowers will borrow ____ and suppliers will supply ____.
a. more; less
b. less; more
c. less; less
d. more; more
From the passage of the 16th amendment to the U.S. Constitution, income taxes became
the primary source of income for the U.S.
a. True
b. False
The income to someone such as Lebron James is
a. mostly pure rent.
b. composed of a payment necessary to induce him into employment plus economic
rent.
c. a return to a factor in fixed supply; there is only one of him.
d. All of the above are correct.
A technique that can be employed to make a portfolio less risky than any of its
individual securities is
a. plowback.
b. diversification.
c. programmed trading.
d. speculation.
If an airline company has several empty seats on a flight and the full price of an air
ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for
the airline to
a. charge a stand-by passenger no less than the full fare of $500.
b. charge a stand-by passenger less than $100.
c. charge a stand-by passenger more than $500.
d. charge a stand-by passenger more than $100.
e. fill the seats at the last minute for any price.
An important assumption that is made when constructing a supply schedule is
a. only price and quantity matter in determining supply.
b. firms always want to sell a certain amount of a product.
c. supply is too important to be left to the marketplace.
d. all other determinants of supply are held constant.
e. demand has a positive slope.
Average physical product measures the output per unit of input.
a. True
b. False
To understand most of today’s economic activity in the U.S. economy, we should look
at which of the following models?
a. perfect competition and pure monopoly
b. perfect competition and oligopoly
c. oligopoly and monopolistic competition
d. monopolistic competition and monopoly
Globalization was much more pervasive in the 1800s than it is today.
a. True
b. False
Total utility increases if one more unit of a product is purchased and marginal utility is
positive.
a. True
b. False
Unions can be thought of as constituting
a. a monopoly element in the supply of labor.
b. a monopoly element in the demand for labor.
c. an oligopoly element in the supply of labor.
d. a competitive element in the demand for labor.
Define the following terms and explain their importance to the study of economics.
a. maximin criterion
b. Nash equilibrium
c. Dominant Strategy
d. Zero-sum game
e. Credible threat
At a perfectly competitive firm’s short-run equilibrium level of output,
a. P = MR = MC.
b. P = MR, but MR does not equal MC.
c. P = MC, but MR does not equal MC.
d. MR = MC and P < MR.
Capital refers to an inventory or a stock of productive equipment and machines.
a. True
b. False
Corporations have the disadvantage of (i) double taxation; (ii) unlimited liability.
a. i and ii
b. i not ii
c. ii not i
d. neither i nor ii
All the land in a California valley is owned by one person. The supply of land is fixed
and is rented each year to farmers who bid for it in an open auction. Given the rents
they must pay, the farmers barely earn subsistence. Sympathy for the poor farmers leads
the state to bring in irrigation facilities to raise the productivity of the farms and raise
the farmers’ income. The most likely outcome is
a. the farmers will prosper.
b. the farmers and the landlord will share the new prosperity.
c. only the landlord will prosper.
d. no one will prosper.
Explain the source of monopoly power for DeBeers’ Diamond Mine in South Africa,
Microsoft (owned by Bill Gates), the American Medical Association (which licenses
doctors), Polaroid’s Instant Picture Cameras, USAir (which owns virtually all the gates
at the airport in Charlotte, North Carolina), and electric utilities.
A congress member concerned about ensuring vertical equity in taxation would be most
likely to argue for obtaining government revenue through a
a. progressive tax on personal income.
b. regressive tax on corporate income.
c. sales tax.
d. head tax.
If the demand curve shifts outward and the supply curve remains the same, price will
fall.
a. True
b. False