Money spent on college tuition is considered human capital by economists.
a. True
b. False
Figure 22-2
In Figure 22-2, if the United States and Mexico are negotiating to trade wheat for
petroleum,
a. the United States must receive more than 1 2/3 units of petroleum for a unit of wheat.
b. Mexico must receive more than 1 2/3 units of petroleum for a unit of wheat.
c. the limits of the agreement are between 1 unit of wheat for 2/3 unit of petroleum for
the United States and 1 unit of wheat for 1 1/2 units of petroleum for Mexico.
d. if the agreement is formalized at 1 unit of wheat for 1 unit of petroleum, then Mexico
will benefit from the trade but the United States will not.
Government can deal with externalities through the use of taxes and subsidies.
a. True
b. False
Marginal profit equals the difference between marginal revenue and marginal cost.
a. True
b. False
Economies of scale imply: (i) a continuously falling AC curve; (ii) a larger output is
more efficient than a smaller output.
a. i and ii
b. i but not ii
c. ii but not i
d. neither i nor ii
As a result of a decline in interest rates and a rise in household income, the demand
curve for housing has shifted to the right, but has retained the same slope.
Consequently, the elasticity of demand for housing
a. has declined.
b. has increased.
c. has remained unchanged.
d. cannot be compared.
Regarding the relationship between marginal profit and average profit, which of the
following statements is NOT true?
a. If the average profit is rising, the marginal profit figure must be rising.
b. If marginal profit is lower than average profit, then average profit must decrease
when profit increases.
c. If marginal profit is below average profit, the average profit decreases.
d. All of these statements are true.
A corporation is legally owned by its
a. chief executive officer.
b. board of directors.
c. bondholders.
d. stockholders.
Figure 7-10
In Figure 7-10, the curve labeled C is
a. average fixed cost.
b. average total cost.
c. average variable cost.
d. marginal cost.
Attempts by the government to reduce the rate of inflation often result in higher
unemployment in the short run.
a. True
b. False
Prices influence the distribution of income by making the distribution fairer.
a. True
b. False
Slope is measured as rise/run.
a. True
b. False
A normal production possibilities frontier has a
a. positive slope, and is steeper near the horizontal axis than near the vertical axis.
b. negative slope, and is steeper near the horizontal axis than near the vertical axis.
c. positive slope, and is steeper near the vertical axis than near the horizontal axis.
d. negative slope, and is steeper near the vertical axis than near the horizontal axis.
e. zero slope, and it does not touch the horizontal axis.
Are there impediments to international movement of labor and capital?
a. Yes, but they apply to labor only, capital mobility is almost completely free.
b. Yes, although these apply to capital, and not to labor.
c. Yes, there are significant (often prohibitive) restrictions on labor and capital mobility.
d. No, these have been removed with the passage of recent trade legislation.
All four market forms discussed in the text maximize profit where
a. P = MC.
b. AR = AC.
c. MR = MC.
d. MC = AR.
The optimum quantity of an input occurs when
a. diminishing returns set in.
b. marginal revenue product equals input price.
c. marginal physical product equals input price.
d. marginal revenue product equals output price.
A demand schedule relates prices of a particular good to quantities demanded.
a. True
b. False
The imposition of price ceilings on a market often results in
a. an increase in investment in the industry.
b. a persistent surplus in the market.
c. the diversion of income toward black-market suppliers.
d. lower prices being offered on the black market.
If the marginal physical product of more labor is twice as high as the marginal physical
product of more machinery, a rational firm should
a. reduce the labor used and increase the machinery used if labor costs half as much as
machinery.
b. reduce the labor used and increase the machinery used if labor and machinery cost
the same amount.
c. reduce the labor used and increase the machinery used only if labor costs more than
twice as much as machinery.
d. reduce the labor used and increase the machinery used only if labor costs exactly
twice as much as machinery.
Monopolists usually earn economic rent.
a. True
b. False