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Table 7-4
Table 7-4 shows a production relationship. Assuming the labor input is fixed at 4, what
will be the optimum capital input assuming an output price of $1 and a $90-per-day cost
for one unit of capital?
a. 1
b. 2
c. 3
d. 4
A tariff is better than a quota because
a. it does not distort trade as much.
b. quotas are inflexible.
c. tariffs produce tax revenue.
d. quotas hurt domestic producers; tariffs hurt foreign producers.
One of the most significant developments in labor supply in recent times is the increase
in the labor force participation of married women.
a. True
b. False
In which case will the transition from short run to long run involve the shortest
chronological time?
a. a service that provides temporary secretaries to companies
b. an automobile factory
c. a farm
d. an electric utility
If the rate of interest increases, firms will most likely respond by
a. increasing investment.
b. decreasing investment.
c. not changing investment.
d. increasing capital stock.
A program of protection that results in preserving jobs in certain industries
a. raises average productivity in all sectors of the economy.
b. does so at very high cost to consumers of the products from those industries.
c. is an efficient way to preserve employment, and is cheaper than other forms of
maintaining full employment.
d. is an effective way of encouraging innovation and improvement in production.
Which of the following scenarios could be an example of increasing marginal utility?
a. A father buying three game CDs for his son.
b. A shopkeeper selling the tenth unit of hamburger.
c. A philatelist buying an additional stamp for collection.
d. A consumer buying an additional unit of apple.
John Amaker owns orange groves and hires pickers for a two-week period as shown in
Table 7-3.
Table 7-3
In Table 7-3, diminishing returns set in with picker
a. 3.
b. 4.
c. 5.
d. 6.
e. 9.
Chronic trade deficits lead to a growing public debt.
a. True
b. False
A 50 percent tax on the profits of a monopolist will
a. be totally shifted to the consumer.
b. raise price and lower quantity.
c. cause no change in profit-maximizing price and quantity.
d. change price but not quantity.
Perfect competition requires that three conditions be satisfied.
a. True
b. False
Rational decision making must always be based on the concept of opportunity cost.
a. True
b. False
Excess capacity and inefficiency result under monopolistic competition.
a. True
b. False
Identify the market structure characterized by many small firms selling somewhat
different products.
a. Monopoly
b. Monopolistic competition
c. Perfect competition
d. Duopoly
If average cost is falling, then marginal cost must be falling.
a. True
b. False
Which of the following would be the most likely candidate for direct application of the
benefits principle of taxation?
a. education
b. fire protection
c. police protection
d. use of roads
Figure 4-18
In Figure 4-18, there would be a surplus of T-shirts if the price were
a. $10.
b. $8.
c. below $8.
d. between $8 and $6.
Centrally planned economies use free-market systems for their production planning.
a. True
b. False
A large factory pours its toxic wastewater into a nearby river, and as a result, the
residents of a downstream community experience high rates of illness and birth defects.
The economic problem illustrated by this example is
a. marginal thinking.
b. comparative advantage.
c. repealing the laws of supply and demand.
d. externalities.
e. productivity growth.
When institutional money managers use their computers to decide on large sales or
purchases in the stock market, they are employing
a. the herd instinct.
b. the bandwagon effect.
c. program trading.
d. stock watering.
Average revenue is slightly higher than price.
a. True
b. False
