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If a farmer's opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer
bushels of soybeans, then her opportunity cost of producing 50,000 bushels of soybeans
must also be 20,000 fewer bushels of wheat.
a. True
b. False
Define the following terms and explain their importance to the study of economics.
a. price elasticity
b. complements
c. substitutes
d. cross elasticity
e. supply elasticity
Under a laissez-faire system,
a. government organizes production and distribution of goods.
b. a small bureaucracy of central planners tells firms what to produce and how to
produce it.
c. costs of production and consumers' demands determine the output mix.
d. firms try to produce the goods that they think are good for consumers.
Voluntary programs are dependable ways to protect the environment.
a. True
b. False
Interest income on municipal bonds
a. is subject to a portion of federal income tax.
b. is taxable on amounts greater than $15,000 per year.
c. is payable quarterly, at time of coupon redemption.
d. is exempt from federal income tax.
If the budget deficit was eliminated, the federal government would have more money
than it could spend.
a. True
b. False
If the marginal utility of apples exceeds the marginal cost of producing apples, then in a
free market production of apples will ____, with the likely result that marginal utility
will ____.
a. rise; fall
b. fall; rise
c. rise; rise
d. fall; fall
The price system takes into account consumer preferences in the distribution of goods
and services.
a. True
b. False
The personal income tax is the single largest source of revenue for the federal
government.
a. True
b. False
The monopoly producer
a. sets MU equal to P.
b. sets MR = MC.
c. has MC > MU.
d. sets MR = P.
According to Robert Reich, secretary of Labor in the Clinton administration,
a. the identity of American companies is clear, and laws should be written accordingly.
b. foreign companies are clearly different from American companies.
c. multinational companies have clear bases of operations, which form their identity.
d. it is almost impossible to define the nationality of a multinational company.
e. identifying the country of origin of a product is almost impossible, but essential for
proper regulation.
All decisions involve opportunity cost.
a. True
b. False
Often when consumers enter the used car market to make a purchase,
a. they know little about what they are purchasing.
b. the motto "let the buyer beware" applies.
c. the information they gain may not be perfect, but may be what economists call
"optimally imperfect."
d. All of the above are correct.
Which of the following is never true for a sales revenue maximizer with an
upward-sloping supply curve?
a. MR = 0
b. MR = MC
c. Economic profits are positive.
d. P = MC
Demand for an input is derived from the demand for the final product.
a. True
b. False
Antitrust laws are designed to promote competition.
a. True
b. False
The Army Corps of Engineers has been accused of acting on the basis of a so-called
"edifice complex."
a. True
b. False
To equalize traffic on transportation routes, a pricing arrangement called "peak,
off-peak pricing" would most likely be proposed by
a. economists.
b. politicians.
c. regulators.
d. the general public.
Double taxation of corporate profits
a. imposes losses on investors' incentives in corporate stock.
b. tends to keep corporations out of low-profit activities.
c. makes the allocation of resources more efficient.
d. makes issuing new stock prohibitively expensive.
Marginal revenue product is essentially the additional revenue generating from selling
one additional unit of output.
a. True
b. False
The demand curve facing a monopolistically competitive firm is generally
a. steeper than the demand curve that would face a perfectly competitive firm in the
same industry.
b. less elastic than the demand curve that would face a monopoly in the same industry.
c. steeper and more elastic than the demand curve that would face a perfectly
competitive firm in the same industry.
d. flatter than the demand curve that would face a monopoly in the same industry.
Individuals play ____ in causing pollution.
a. almost no role
b. a large but decreasing role
c. a major role
d. a reconstructive role
Figure 5-6
A shift in the budget line in Figure 5-6 from AB to AC indicates
a. the price of wine coolers has risen.
b. income has increased.
c. the price of beer has fallen.
d. the price of wine coolers has fallen.
e. All of the above are correct.
Figure 7-5
Which of the curves in Figure 7-5 could be a firm's average fixed cost curve?
a. (a)
b. (b)
c. (c)
d. (d)
