The growth rate of productivity is the most important determinant of material
well-being in the short run.
a. True
b. False
The demand curve for funds is downward sloping because
a. the value of the MRP in terms of today’s money shrinks as the interest rate rises.
b. future returns must be discounted more when the interest rate rises.
c. as the interest rate rises, more and more investments become unprofitable.
d. All of the above are correct.
The cost disease of personal services stems primarily from the fact that
a. prices rise too slowly to provide public receipts.
b. inflation has been with us since the early 1970s.
c. personal service requires direct contact between producer and consumer.
d. sellers of personal services have strong unions.
In the United States, price-fixing arrangements among firms are
a. legal.
b. illegal only if a court decides that the prices fixed are unreasonable.
c. illegal only if a court has concrete evidence that the firms explicitly colluded.
d. illegal.
Economists might be willing to accept a policy that adversely affected distribution of
income if it
a. lessened income disparities.
b. diminished labor productivity by a large amount.
c. increased productivity by a large amount.
d. were favorable to the rich.
Horizontal equity means that equally situated individuals should be taxed equally.
a. True
b. False
The cost disease of the service sector is evidenced by
a. a failure of the market mechanism.
b. increased quality of public and private services.
c. dramatic increases in municipal budget burdens for education, health care, and police
and fire protection.
d. the increased productivity in the services area.
The price mechanism solves the “for whom” problem by assigning high prices to goods
in high demand and letting customers choose whether to purchase them.
a. True
b. False
Following mergers that raised the market shares of two airlines to 79 and 82 percent,
respectively, of traffic in their hub cities, prices of service rose and the quantities of
service fell, even though in most other markets prices fell and quantities increased. The
result suggests that these markets
a. were contestable.
b. were monopolized.
c. become more competitive due to oligopolistic rivalries.
d. had no barriers to entry.
Figure 5-5
Figure 5-5 shows a consumer budget line for french fries and hamburgers. The price of
an order fries is $2. The price of a burger is
a. $1.
b. $2.
c. $4.
d. $8.
During the twentieth century, the real income of the average American grew by a factor
of more than seven.
a. True
b. False
During periods of U.S. prosperity,
a. imports from other countries are undesirable
b. imports from other countries are sought out
c. countries importing goods to the U.S. may use their earnings to buy American goods
d. countries importing goods to the U.S. are unable to buy American goods
The antitrust laws are sometimes used by companies to reduce competition in their
markets rather than enhance it.
a. True
b. False
Economic progress is best measured by
a. the growth rate of prices over time.
b. the growth rate of GDP per capita
c. the amount of time it takes a worker to work to afford certain goods and services.
d. the growth rate in the population.
Total profit is maximized
a. where the difference between total revenue and total cost is greatest.
b. at that output level where marginal revenue equals average cost.
c. where total revenue is at a maximum.
d. at the point where all variable costs are covered.
Some economists believe that our best years of economic growth are behind us.
a. True
b. False
Table 22-4
Table 22-4 presents the demand and supply schedules for television sets in Japan and
the United States. If Japan and the United States trade with each other, which country
will export television sets and how many?
a. Japan will export 20,000 television sets to the United States.
b. Japan will export 30,000 television sets to the United States.
c. The United States will export 20,000 television sets to Japan.
d. The United States will export 40,000 television sets to Japan.
Many Americans believe that taxes have been gobbling up an ever-increasing share of
the U.S. economy. Is this observation correct? Explain.
What arguments have been advanced in defense of price discrimination?
What is the difference between the accountant’s concept of profit and the economist’s
view of profit?
Specifically, what might cause the quantity demanded of a particular good to double at
a particular price?
Milk costs $2 and the last unit provides $4 in marginal utility. Cheese costs $4 and the
last unit provides $2 in marginal utility. Is this an efficient allocation of resources? If so,
why? If not, why not?
What do you mean by Coase theorem?
As an investor, would you agree to the statement “put all your eggs in one basket?”
Substantiate your answer.
What does cross elasticity of demand between goods reveal about the nature of
relationship between them?
If you go to a bar tonight and have three beers before going home to study economics,
will you likely receive some consumer surplus? Explain why or why not.