The Industrial Revolution refers to the stream of new technology and the resulting
growth of output than began in England toward the end of the eighteenth century.
a. True
b. False
The marginal revenue curve for a monopolist is
a. always above the demand curve.
b. generally below the average cost curve.
c. always above the average revenue curve.
d. always below the demand curve.
Figure 19-4
The panels in Figure 19-4 represent the supply and demand conditions for a factor of
production. In which case is the factor not earning any rent?
a. 1
b. 2
c. 3
d. 4
A firm is generating detrimental externalities when
a. MSC is less than MPC.
b. MSC is the same as MPC.
c. MSC is greater than MPC.
d. MPC includes some incidental costs.
In most businesses there is only one way to produce output.
a. True
b. False
A point lying inside (under) a production possibilities curve indicates that
a. the economy is saving money.
b. there are no associated opportunity costs.
c. more output could be produced with existing resources.
d. technology limits production.
Figure 11-6
The industry described in Figure 11-6
a. is not a natural monopoly because no firm would produce in the long run unless the
government intervened in the market.
b. is not a natural monopoly because the average total cost curve is U-shaped.
c. is a natural monopoly because the economic profit is positive for a monopolist if the
government doesn’t intervene.
d. is a natural monopoly because price is less than average total cost at the output that
would be produced by the industry under perfect competition.
The future of the U.S as leader of the economic world:
a. is likely to continue for generations to come
b. will be sustained in the next generation, but not beyond
c. requires U.S. action in several critical economic areas
d. requires a return of manufacturing to the U.S.
The relationships between elasticity and total revenue hold because:
a. total revenue equals price divided by quantity demanded
b. total revenue equals price times quantity demanded
c. a drop in price has two opposing effects on the two components of the formula
d. both b and c
Economic models are often expressed in
a. equations.
b. words.
c. graphs.
d. physical objects..
A monopoly restricts output and charges a higher price than other types of firms.
a. True
b. False
Resources are used to create goods and services.
a. True
b. False
A firm should make an investment only if
a. it is profitable in every year.
b. the present value of the profits exceeds the present value of the costs.
c. the present value of the revenues exceeds the present value of the costs.
d. there are no large losses in the early years.
The formula for price elasticity of demand that is used in practice
a. usually drops all minus signs.
b. usually takes on different values at different points on the demand curve.
c. may calculate the percentage change in price between P1 and P2 as “(P2 − P1) as a
percentage of (P1 + P2)/2.”
d. All of the above are correct.
An effective craft union acts as a monopoly
a. demander of labor.
b. seller of labor.
c. demander of capital.
d. seller of capital.
Which of the proposals for education reform is likely to be supported by an economist
concerned with efficiency?
a. Give families “education stamps” to be spent at the school of their choice.
b. Assign children to particular schools based on where they live.
c. Give all schoolchildren the same number of years of education.
d. Abolish private (i.e., fee-charging) schools.
Inefficient resource allocation is a major problem with monopolies.
a. True
b. False
If the interest rate on saving is 5 percent per period, then the true opportunity cost of
being paid $100 next period instead of this period is
a. $5.
b. $105.
c. less than $5 if people suffer from a “defective telescopic faculty.”
d. more than $5 if people suffer from a “defective telescopic faculty.”
A supply curve can be thought of as
a. a graphical display of “market potential.”
b. a graphical representation of the information in a supply schedule.
c. showing the maximum quantities that firms are able to produce.
d. a forecasting tool.
e. All of the above are correct.
If wages decrease and workers choose to work more hours or more shifts, their behavior
is evidence of
a. the substitution effect.
b. the income effect.
c. rational expectations.
d. rational ignorance.
An economy is judged efficient if
a. it is good at producing what people want.
b. it produces things that people may not want but in the least wasteful way.
c. produces whatever people want in a way that may not be the least wasteful.
d. it is a free-market economy and not a command market.
The following are common errors students make when discussing supply and demand.
What is the mistake in each?
a. At equilibrium, demand equals supply.
b. The quantity of demand is greater than the quantity of supply.
c. They move along the line from both ends to an equilibrium in the middle.
d. The increase in demand causes an increase in supply.
Lines, ration coupons, and black markets are symptoms of a
a. price floor.
b. price ceiling.
c. free market.
d. barter economy.
In the United States, the incidence of poverty has declined since the 1970s.
a. True
b. False