Which of the following is most likely to reduce the consumption of an exhaustible
natural resource?
a. a decrease in monopoly control of the market for the resource
b. government tax policies that give tax breaks to entrepreneurs who search for new
reserves of the resource
c. implementation of a price ceiling for the resource below its equilibrium price
d. government macroeconomic policies that lower the interest rate on bonds
Whenever the interest rate goes up, the price of bonds will go down.
a. True
b. False
Uncoordinated decisions in perfect competition lead to mass confusion and inefficiency.
a. True
b. False
Figure 3-5
At present, faculty in the Economics Department teach introductory and upper-level
courses. Which graph in Figure 3-5 represents the change in the production possibilities
of the Economics Department after a policy of using graduate students in addition to
faculty to teach introductory sections was implemented?
a. 1
b. 2
c. 3
d. 4
Total profit is maximized where
a. MR = MC.
b. marginal profit is zero.
c. the slope of the marginal profit curve is zero.
d. All of the above are correct.
The government considers a market to be unconcentrated if its HHI number is less than
____, and highly concentrated if that number exceeds ____.
a. 1,000; 1,800
b. 100; 9,000
c. 50; 500
d. 500; 1,300
If Japan imposes a quota on imports of rice, the effect will be
a. less rice and higher price in Japan, lower rice prices in exporting countries.
b. more rice and higher price in Japan, higher rice prices in exporting countries.
c. less rice and lower price in Japan, higher rice prices in exporting countries.
d. more rice and lower price in Japan, lower rice prices in exporting countries.
e. less rice and higher price in Japan, higher rice prices in exporting countries.
Unemployment in the United States varies considerably over time.
a. True
b. False
Marginal social cost is made up of marginal private cost and incidental cost.
a. True
b. False
The nation’s stock of capital can increase only when net new investment takes place.
a. True
b. False
Agriculture is a sector of the economy where increased productivity has been
accompanied by a significant decrease in employment.
a. True
b. False
In the cigarette industry either R. J. Reynolds or Phillip Morris, for a time, raised prices
twice a year by about 50 cents per carton. The other firms in the industry raised their
prices by the same amount. Economists call this
a. predatory pricing.
b. a price war.
c. price leadership.
d. sales maximization.
Economic rents are earned whenever
a. demand for a factor is perfectly inelastic.
b. a factor receives a reward that exceeds its cost.
c. a factor earns a reward that is greater than the amount needed to keep the factor in its
present employment.
d. a factor’s supply curve intersects its demand curve at a point where demand is
inelastic.
The total cost curve generally has
a. slope values which first decrease and then increase rapidly.
b. slope values which first increase rapidly and then decrease.
c. increasing slope values.
d. decreasing slope values.
In the United States, all property is privately owned.
a. True
b. False
Profit is maximized at the output at which marginal revenue equals marginal cost.
a. True
b. False
The demand for a new effective drug for the cure of AIDS would most likely be
a. elastic.
b. unit elastic.
c. perfectly elastic.
d. highly inelastic.
Total profit of a competitive firm can be found by multiplying profit per unit times units
sold.
a. True
b. False
A quota reduces quantity sold by operating through the demand side of the market.
a. True
b. False
Figure 6-6
An article in the Wall Street Journal reports that “most cable TV operators are aware
that cable is price sensitive, and there comes a point where people won’t pay the price.”
Which demand curve in Figure 6-6 best illustrates this situation?
a. 1
b. 2
c. 3
d. 4
The incidence of a tax refers to
a. who actually collects the tax.
b. how frequently the tax is collected.
c. who bears the economic burden of the tax.
d. how the tax affects prices or wages.
The burden of the payroll tax falls entirely on the employee regardless of how it is
formally divided between employer and employee if the
a. demand for labor is inelastic.
b. supply of labor curve is horizontal.
c. supply of labor curve is virtually vertical.
d. demand for labor curve is elastic.
Prohibiting price increases in situations of true scarcity could best be described as
a. interfering with the “law” of supply and demand.
b. thwarting the “law” of increasing returns to scale.
c. violating the “law” of increasing cost.
d. interfering with the “law” of diminishing marginal utility.
A tariff on imports affects foreign suppliers ____; a quota affects foreign suppliers
____.
a. effectively, ineffectively
b. haphazardly, carefully
c. equally, capriciously
d. unfairly, fairly
e. unequally, unequally
Firms operating in competitive markets have little choice but to innovate.
a. True
b. False